BE/RBI NOTE/35/2018

Mumbai based FINO PAYMENTS BANK has entered into problems.  RBI has directed them to stop  opening new Accounts till the processes stipulated are duly followed.  This relates to Deposits Limits which is restricted to rupees one lac.

Also, it is learnt that Paytm Payments Bank has been advised to stop acquiring fresh customers after a review.  What has perspired is as under:

  1. Fino Payments Bank is in the process of making necessary product and technological changes and the bank has assured that its existing users will not be put to inconvenience and can undertake normal banking activities.
  2. It is also learnt that RBI must have objected to the way in which customers were acquired by Paytm Payments Bank through business correspondents, who were only collecting original documents from customers and relying on the eKYC process of verifying the user through Aadhaar.
  3. In the case of Paytm these BCs were agents of the payment company and the bank opening accounts through them amounted to using third party services for customer on-boarding.
  4. The modus operandi is like this:
    1. Paytm uses OTP (one-time password) to take approval from the user who identifies themselves biometrically.
    2. Further, the company insists on confirmation of consent via phone call and SMS, giving them the option to opt out if they do not want it.
    3. Reserve Bank of India is understood to have raised questions on this process.
    4. Also, it is learnt that the regulator has raised objections to the fact that both One 97 Communications, which owns Paytm, and Paytm Payments Bank were operating from the same office, whereas the licence for the bank was issued in the name of Vijay Shekhar Sharma, the founder of Paytm, who owns 51% in the payments bank.
  5. The bank will continue to operate all existing wallet and savings accounts of its customers.
  6. Those who have minimal KYC accounts can comply with full KYC compliance as well.
  7. It is learnt that new customers cannot open minimal KYC wallets for the time being .

From the Regulator’s Side:

RBI, after the Airtel Payments Bank incident has become exceedingly watchful about the

  • Account Opening processes and
  • New Customers induction process

of the newly licensed entities.  This has prompted the Regulator to go for an exhaustive audit of the banks and these steps initiated in that process.

Airtel Payments Bank was stopped from opening accounts due to:

  • irregularities in obtaining approval from customers regarding account opening and
  • diverting DBT (Direct Benefit Transfer) payments into those accounts


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