The RBI is currently taking a strict approach regarding Re-KYC requirements for payment companies. Consequently, these companies are making a request to the RBI, as they are facing difficulties in completing the Re-KYC process for small shopkeepers.

The Reserve Bank of India (RBI) has tightened its stance on Re-KYC norms for payment companies. In response, these companies have asked the RBI for an extension until September 15, citing significant challenges in completing the Re-KYC process for small shopkeepers.

Companies facing operational difficulties

According to a Moneycontrol report, many companies still have the task of completing KYC for thousands of small and informal business owners. Companies like Paytm, PhonePe, and Google Pay are conducting Re-KYC for shopkeepers in small towns and villages who accept payments via QR codes and soundboxes. However, the requirement for physical verification, combined with new and stringent KYC rules, has made the task difficult for these companies.

Lack of documentation

The report indicates that the majority of business owners affected by this process are small shopkeepers and those running informal businesses. Many of them lack the necessary documents for KYC. Although the total share of payments generated by these merchants is not very large, they play a crucial role in expanding digital payments and financial services in small towns and villages.

Expectation to complete 80% of Re-KYC

Most payment companies expect to complete approximately 80% of the Re-KYC process by September 15. However, completing KYC for the remaining merchants remains a challenge. A major reason for this is the RBI rule mandating that physical KYC must be conducted by the payment companies’ own employees; the task cannot be outsourced to third-party agency staff. As a result, these companies have had to increase their workforce over the past year.

Why is KYC necessary?

It is worth noting that the objective of the RBI’s KYC regulations is to ensure that financial institutions possess accurate information regarding their customers’ identities and addresses. This helps in monitoring fraud, money laundering, and other illegal activities. Although companies were given time to comply with these regulations, the task of re-doing KYC for millions of merchants is massive. For this reason, payment companies are seeking more time.