Payments industry recommends KYC bureau to Nilekani-led RBI committee

PCI meets Nandan Nilekani-led committee, asks for smoother access to transaction infrastructure

The Indian payments industry on Friday recommended a Know Your Customer (KYC) bureau to the Nandan Nilekani-led Reserve Bank of India (RBI) committee on digital payments. This would iron out issues faced by the industry since the Supreme Court judgment on September 26, 2018, disallowed private companies from asking Aadhaar data of their customers for the KYC process.

The Payments Council of India (PCI), the payments and settlement arm of industry body Internet and Mobile Association of India, also said there should be a regulatory regime to ensure equality between cash and non-cash transactions. Some of the other recommendations were: There should be seamless access to payments and settlements infrastructure, promotion of economic viability through tax incentives and exemptions, a shot in the arm for competition, safeguard for transactions, and a level playing field for new entrants.

The committee was formed on January 8 and will submit its report within 90 days. Its mandate is to recommend how to “deepen” digital payments, with the aim of enhancing financial inclusion through digitisation.

On Thursday, during the press conference after the monetary policy review, RBI Governor Shaktikanta Das said the central bank was considering the feasibility of regulating digital payments, and it would soon publish draft guidelines for consultations.

Naveen Surya, chairman emeritus, PCI, met with the committee in Mumbai on Friday. Later, he said, “Currently, monthly retail digital payments are about $275 billion. We want it to be $500 billion in the next two years. The country is on the verge of becoming a digital superpower.”

He added that cash was still the primary mode of transaction. “To digitise, we need to build a robust ecosystem and enhance customer confidence.”

The PCI also told the panel that payments below Rs 50,000, especially on prepaid instruments (PPI) such as Paytm, Mobikwik, and ItzCash should happen seamlessly and with minimum KYC verification.

At present, PPIs are only allowed partial direct access to payments infrastructure, through card networks and the Unified Payments Interface. The PCI has recommended seamless access.

It has also asked for interoperability among PPIs, currently only allowed for merchants and remittances at the domestic level. This should be allowed to foreign merchants and foreign inward remittances, it has recommended.

“Credit cards are a critical instrument for growth of digital payments in India. Approximately, 40 million credit cards have been issued so far. The credit bureau has records of 400 million consumers. So there is clearly a huge untapped market,” said the PCI. “So, we are betting big in the framework to issue credit cards by non-banking finance companies to be a catalyst for growth of digital payments across the economy.” 

The PCI also recommended that customers should be allowed to choose their level of KYC, depending on the frequency of their transactions and convenience. It also suggested appointing a full-time independent payments expert on the board of the payments and settlements system.