Monetary policy: RBI to revisit KYC rules after digital lending fraud

Recent instances of fraud in digital lending activities have forced the Reserve Bank of India (RBI) to relook the Know Your Customer –Anti-Money Laundering (KYC-AML) norms to plug the loopholes.

“Wherever we have seen cases where irregularities have happened, we are looking into it and based on the investigation, appropriate action could be initiated,” M Rajeshwar Rao, deputy governor of RBI, said during the post-policy interaction with the media.

“As for the KYC issues, there are certain operational issues, we are engaging internally and, if required, we will look at what kind of amendments are required for the regulations, and make it simple but effective and address concerns around KYC on an ongoing basis,” Rao said.

There have been a series of instances when customers who used certain digital lending apps were defrauded. Recently, fraudsters used PAN numbers to avail of loan from Dhani Loans and Services Limited, which was formerly known as Indiabulls Consumer Finance Limited, a non-deposit taking NBFC registered with the RBI and a 100 per cent subsidiary of Dhani Services Limited.

RBI Governor Shaktikanta Das said the RBI actions on KYC rules have to be in consonance with the Prevention of Money Laundering Act (PMLA). He also said the RBI gets many complaints from customers, who fall prey to fraudsters while using the digital lending platforms.

The banking regulator is also planning to come out with guidelines on digital lending within two months, Rao said.

In November last year, the working group on digital lending, including lending through online platforms and mobile apps, had submitted their recommendations. The RBI has received a lot of feedback on the recommendations and have completed examining those comments.