#4 Regulatory Changes that will Make Digital Wallets Less Attractive to Indian Users The RBI is asking full KYC for transactions as low as INR 10,000

The Reserve Bank of India (RBI) has recently released new guidelines for prepaid payment instruments (PPIs), including digital wallets.

The RBI stated that Know Your Customer (KYC), Anti-Money Laundering (AML), Combating Financing of Terrorism (CFT) guidelines, issued by the Department of Banking Regulation (DBR), will be applicable for digital wallet users.

After the recent move, customers will now be able to transfer money between e-wallets of different companies and banks seamlessly through the Unified Payments Interface (UPI) mode, only if they complete the full KYC process within next 12 months.

Currently, a user of Paytm Wallet can't transfer money from his wallet to another digital wallet, run by a different company. Once interoperability is introduced, the user can receive money from any digital wallet. This will help customers use a set of payment instruments seamlessly with other users within the segment. For all existing users, digital wallet companies have been asked to convert to the new KYC format by December 31.

BIZ Experiences India takes a look at four Regulatory changes that will make digital wallets less attractive for Indian Users:

• Killing the Idea of Digital Wallets: Under the new norms, the KYC-compliant digital wallet amount loaded in such PPIs during any month shall not exceed INR 10,000 and the total amount loaded during the financial year shall not exceed INR 1,00,000/-. Completing the full KYC formality is a very lengthy and dreary task and this might send back the digital wallet users to the traditional mode of banking.
• Increased Net Worth Requirement: The RBI has said that all digital wallets companies seeking license from RBI under the PSS (Payment and Settlement Systems Act, 2007) Act require a minimum positive net-worth of INR 5 crore against INR 2 Crore last year, at the time of submitting application as per the latest audited balance sheet .
• Maintaining Minimum Net Worth: These companies will have to submit a certificate from their Chartered Accountants (CA) to comply with the applicable net-worth requirement while submitting the application for authorization. The application will be processed by RBI based on this net-worth which shall be maintained at all times. Also, the digital wallets must achieve a minimum positive net worth INR 15 crore within three financial years from the date of receiving authorisation.
• KYC for Low Usage Wallets : The RBI is asking full KYC for transactions as low as INR 10,000. This can be a problem for users who have a low-usage in digital wallets and are still required to do a KYC beyond 12 months.