New Delhi: With no alternative customer verification mechanism in place, India Post Payments Bank (IPPB), which started its operations in September, has not been able to on-board new customers in the last two months.

Only customers seeking direct benefit transfer (DBT) have been able to open accounts through Aadhaar based e-KYC (electronic-know your customer), said Suresh Sethi, managing director and chief executive officer, IPPB. “Currently, the account opening per day is 15-20% of what we were doing earlier. The pace of acquisition has slowed down by 75-80%...the judgement definitely did come as a major blow."

On 26 September, a five-member Constitution bench of the Supreme Court, headed by former chief justice Dipak Misra, had said that Aadhaar can only be used for welfare schemes and subsidies of the state under section 7 of the Aadhaar Act. It had also barred private companies from using Aadhaar data for authenticating customers. This has adversely impacted the fintech industry, telecom operators and payment banks.

IPPB, which used Aadhaar-based e-KYC to verify customers, is actively in talks with the regulators to get an alternative KYC process in place. “We have made various representations to the government and we have very clearly heard from the government that they are working towards finding a way which involves voluntary usage of Aadhaar e-KYC."

According to Sethi, the Unique Identification Authority of India (UIDAI) is working on this and has introduced an xml-based structure, which they have shared with the Reserve Bank of India (RBI). “RBI is reviewing it to see if it can be a surrogate paperless process. It basically means that you get on to a portal and you get your Aadhaar data downloaded in the form of an xml file and that file will have all the information needed for opening an account."

However, the proposed process will depend on the availability of portals and URLs. “Under the new mechanism, a customer will have to go to the bank or kiosk to get the sourced data, which is going to be a bit of a barrier, especially for the segments we are targeting. If we expect them to download and create this file, or go to an enrolment centre and get the file, there are going to be barriers."

Sethi also said that in the absence of an alternative online verification process, the offline verification option is always there, but that too has its own drawbacks. “The cost of doing a paper-based on-boarding will clearly mean 10-15 times increase in costs and, therefore, it becomes absolutely non-viable."

IPPB has been incorporated as a public sector company under the Department of Posts with 100% government equity and is governed by RBI. The bank was launched by Prime Minister Narendra Modi on 1 September with the aim to increase access to banking services in rural areas. At present, it has 3,250 customer access points across 650 districts, along with doorstep banking facility, and plans to scale up to 155,000 access points by December-end.

IPPB offers a range of products such as savings and current accounts, money transfer, direct benefit transfer, bill and utility payments, and enterprise and merchant payments. Customers can access the products and related services across various channels—counter services, micro-ATM, mobile banking app, text messages and via phone calls.

A payments bank is a differentiated bank, providing a limited range of products, such as acceptance of demand deposits and remittance of funds. It can accept deposits up to 1 lakh per customer. However, these banks cannot issue loans and credit cards. Other fully operational payments banks include Airtel Payments Bank Ltd, Paytm Payments Bank Ltd and Fino Payments Bank Ltd.

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