RBI And UIDAI Allow Airtel Payments Bank To Take New Customers, Do e-KYC

Nearly 10 months after the trouble started brewing for Airtel and Airtel Payments Bank, the RBI (Reserve Bank of India) and the UIDAI (Unique Identification Authority of India) have permitted the payments bank to onboard new customers and use Aadhaar e-KYC for the same.

As an Airtel spokesperson said, “Airtel Payments Bank has received requisite approvals from The Reserve Bank of India to start onboarding new customers. Airtel Payments Bank has also been permitted by the UIDAI to resume the onboarding of customers using Aadhaar based e-KYC. We thank the authorities for the approvals.”

The spokesperson added, “We remain committed to the Government’s vision of financial inclusion and banking for all.”

What Went Wrong With Airtel And Airtel Payments Bank?

UIDAI first sent notice to Airtel and Airtel Payments Bank in September 2017 following the allegations that the company was using Aadhaar-based SIM verification of customers to open payments bank accounts without their “informed consent”.

At the time, both the entities stated that the opening of a bank account had been “de-linked” from the e-verification process of new mobile connections.

Soon after a second notice was issued in November 2017, after which the company said that no new bank accounts were being opened without the consent of the customers. The company also gave the assurance that additional safeguards had been put in place to protect the security and privacy of the customers.

After receiving multiple complaints continuously, in an order issued on December 15, 2017, the UIDAI temporarily banned Airtel and Airtel Payments Bank from conducting eKYC of customers using Aadhaar.

Reports surfaced at the time that bank accounts of more than 2.3 Mn Airtel customers were created, with over $7.3 Mn (INR 47 Cr) being transferred to these accounts.

Further, many Airtel customers also complained that the company was redirecting LPG subsidies to these accounts without their consent.

It was also suggested that subsidies amounting to $26 Mn (INR 167 Cr) of nearly 4.7 Mn LPG customers had been transferred to these accounts without their knowledge.

With the ban, Airtel was not able to conduct e-verification of its telecom customers nor will it be allowed to link customers’ SIM to Aadhaar during the interim period.

Additionally, the Payments bank was barred from opening new accounts using Aadhaar-based eKYC. It will, however, be able to open bank accounts through “alternate methods”, if available.

After making a payment of $21.2 Mn (INR 138 Cr) in DBT subsidy, the company was given a conditional approval to perform Aadhaar-based e-KYC verification of its telecom users till January 10.

What’s Happening With Payments Banks In India?

RBI has been promoting these banks to bolster financial inclusion by giving services such as small savings accounts, payment or remittance services to migrant labour workforce, low-income households, small businesses and unorganised sector entities as well as other users.

A payments bank can accept deposits of up to INR 1 lakh, offer remittance services, mobile payments or transfers or purchases and other banking services like ATM/debit cards, net banking and third party fund transfers but cannot advance loans or issue credit cards.

In April, Reliance Jio commenced the operations of its Jio Payments Bank. While, Department of Posts opened its payments bank in January 2017, after which Paytm promoted Paytm Payments Bank began operations from May 2017.

While FINO kicked-off its operations in June 2017 and Aditya Birla Idea commenced its operations from February 22, 2018.

Apart from these, others that received the RBI’s license include Cholamandalam Distribution Services Ltd, Tech Mahindra Ltd,  Dilip Sanghvi (founder of Sun Pharmaceuticals Ltd) and National Securities Depository Limited.

With Airtel and its Payments bank finally back on track with their operations, we can expect competition to get tougher in the space.

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.