Allow digital onboarding of customers for NBFCs, others: Industry body

The non banking entities are capable of doing minimum know your customer (KYC) for merchant transactions successfully without face- to- face physical interaction with the customer only

Industry body Internet and Mobile Association of India (IAMAI) has requested the government to enable digital onboarding of customers for all regulated non-banking financial services entities like prepaid instruments (PPI), non-banking financial companies (NBFCs), lenders and others going forward,  to avoid physical interaction between the customers and the employees of the entity.

The association said that given the situation with the ongoing lockdown in view of the coronavirus (Covid-19) pandemic, all critical transactions are being conducted via digital means. Users require digital payment instruments for paying for utilities like electricity and water, all e-commerce transactions for essential items and so on. 

"The use cases for digital payments have increased manifold under the lockdown process and more and more users are resorting to such instruments to ease their transactional needs.  Similarly, there exists technology and use cases for onboarding of lending, insurance, investments and other customers performing financial services digitally," the IAMAI said in a statement.

The non-banking entities are capable of doing minimal know your customer (KYC) verification for merchant transactions successfully without face- to- face physical interaction with the customers. The current Video-KYC regulations are prescriptive and require the officer to be on the other side during the video verification and mandate meeting customers in-person as part of due diligence.

IAMAI further said that financial services and payments sector has for long been asking for complete remote e-KYC norms as the only requirement for this sector and now is the right time for the government to take over this requirement. 

"The industry should  be allowed to use Aadhaar based authentication with immediate effect and the need for an in-person verification as part of video KYC be removed entirely and companies be allowed to leverage technology solutions to replace In-person verification," said IAMAI

In the current circumstances, physical KYC is not feasible and the situation is likely to continue similarly until the coronavirus in completely under control. This has meant that many customers are unable to utilize the full range of financial services offered by the entities at times of the present crisis, due to the KYC restriction. There are numerous users who are either using these services for the first time under lockdown or are old users but never did full KYC as they did not use the instruments as extensively as they are required to do now.  In both cases, an option of doing KYC digitally should be provided to them to access the services normally like before.

"The association has appealed to the government that these provisions need to be revisited in the context of the present crisis. Digital onboarding to be the new normal for performing KYC, keeping the associated risks under control using technology. This will ease the overall impact of the pandemic during the lockdown and even beyond to help the government in containing its spread," it added.