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Banks interested in taking over Paytm Payments Bank’s business will need to conduct a re-KYC process for its merchant customers, costing between Rs 60-66 crore. This process is crucial for compliance purposes, ensuring the legitimacy of customers’ identities.
What is KYC?
KYC stands for “Know Your Customer.” It’s a process where financial institutions gather data and documents to confirm a client’s identity. Re-KYC happens after the initial verification to ensure ongoing compliance.
Costs and Procedures:
- Costs: Banks estimate the re-KYC charges per customer to range between Rs 90-110.
- Merchant KYC: Merchants are charged around Rs 100 per person for the re-KYC process.
- Compliance: Banks undertake re-KYC to meet regulatory requirements and adhere to compliance processes.
Background:
- Deficiencies: Reports highlighted deficiencies in Paytm Payments Bank’s KYC process, leading to regulatory actions.
- Regulatory Action: The Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank due to lapses in adhering to anti-money laundering laws.
Re-KYC Methods:
- In-person: KYC is conducted either in-person at the merchant’s location or digitally through video verification.
- Third-Party Involvement: Private sector banks often employ third-party entities for the re-KYC process, while public sector banks handle it internally.
Regulatory Action and Timeline:
- Restrictions: RBI imposed significant business restrictions on Paytm Payments Bank, effective from February 29, 2024.
- Completion Time: Re-KYC for Paytm’s customer base is expected to take a few months after the regulatory period ends.
Exceptions and Considerations:
- Selective Process: Not all merchant customer data will require re-KYC, especially for those with a good record.
- Fintech Insights: Some customer data may not need re-verification, easing the burden of the process.
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