India’s Financial Stability and Development Council (FSDC) announced on Wednesday that it intends to introduce a uniform approach to Know Your Customer (KYC) norms across the banking sector. This move aims to streamline the process of verifying account holders and combat illicit lending, particularly via internet applications. The timeline for the rollout of these measures remains unclear.
During a meeting of the country’s financial regulators, the FSDC focused on KYC regulations, but did not specifically address Paytm Payments Bank. At present, different financial institutions follow various methods for KYC verification, but the panel has recommended standardizing the process to ensure the “inter-usability of KYC records across the financial sector.”
The FSDC also discussed the issue of harmful practices associated with online lending apps, which gained prominence during the COVID-19 pandemic. These apps have been criticized for charging high interest rates and employing aggressive recovery tactics.
In related news, the Reserve Bank of India (RBI) recently ordered Paytm Payments Bank to suspend the acceptance of new deposits starting in March, following a series of regulatory violations, including issues with KYC compliance. Customers and merchants of Paytm Payments Bank have been instructed to transfer their accounts to other banks by March 15 as the company works to halt most of its operations.
Concerns over KYC compliance have also led the RBI to take action against major payment networks like Visa and Mastercard, instructing them to suspend card-based transactions for certain businesses. The RBI has also amended its Master Direction on KYC regulations to clarify the identification standards for Politically Exposed Persons (PEPs).
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