KYC challenge for financial institutions
On
March 11th, the Reserve Bank of India barred Paytm Payments
Bank from onboarding new customers with immediate effect. Without elaborating,
the RBI said
it observed ‘material supervisory concerns’ in the bank.
The
regulator also ordered a comprehensive audit of Paytm Payment
Bank's IT systems. Vijay Shekhar Sharma holds a 51% stake in the bank and One97
Communications 49%.The restrictions
mean users cannot sign up for new Paytm wallets
or Paytm Payments Bank savings and current accounts.Meanwhile, sources told Business
Standard that RBI’s action was primarily owing to violations
of KYC and
anti-money laundering norms.The
bank faced a similar action in 2018 after RBI found
that it had violated KYC norms while onboarding users.Banking industry experts said the RBI had
been strict in this regard in view of the Financial Action Task Force country
review, which is coming up this year or early next year.Paytm has denied a news report from Bloomberg that
said RBI found Paytm Payments Bank's servers were sharing information with
China-based entities that indirectly own a stake in the firm.In the past, RBI has levied monetary penalties
on banks for non-compliance with KYC rules.
Earlier
this month, three cooperatives faced penalties while in September 2021, Axis
Bank was fined 25 lakh rupees.Recently,
fraudsters used the PAN number of several people to avail instant loans from
the Dhani app.
This has highlighted the need for stronger KYC checks.
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