After UIDAI allegations, RBI imposes Rs 5 Cr fine on Airtel Payments Bank

The Reserve Bank of India (RBI) has imposed a penalty of Rs 5 crore on Airtel Payments Bank for violating operating guidelines and know your customer (KYC) norms.

In one of the biggest penalties imposed by RBI, the regulator has fined Sunil Mittal-led digital payment bank under the provisions of Section 47A(1)(c) read with Section 46(4)(i) of the Banking Regulation Act, 1949.

RBI had conducted a supervisory visit to the bank from 20-22 November 2017 and issued a show cause notice to the digital payment bank on 15 January, reports Business Today.

In December 2017, it was reported that Bharti Airtel has been using Aadhaar-based eKYC SIM verification process to open new accounts with its Airtel Payments Bank without the consent of its users.

Over 2.3 million customers have reportedly received about Rs 47 crore in their Airtel bank accounts, which they did not know had been opened. The cellular major has allegedly been linking payments bank account to receive LPG subsidy.

On breaching KYC norms by the payment bank, UIDAI took stringent action and suspended e-KYC license key of Bharti Airtel and Airtel Payments Bank with immediate effect.

Following the incident, UIDAI had asked the apex banking body, Department of Telecom (DoT) and audit and consultancy firm PricewaterhouseCoopers to conduct an audit to ascertain if Airtel’s systems and processes are in compliance with the Aadhaar Act or not.

A quick snapshot of the Airtel Payment Bank case

Airtel Payments Bank is a joint venture between Bharti Airtel Ltd and Kotak Mahindra Bank Ltd, was started in January, last year.

The firm was temporarily barred by UIDAI to conduct Aadhaar-based SIM verification of cellular customers using e-KYC process, and e-KYC of payments bank clients.

However, a week later UIDAI temporarily allowed Airtel to use Aadhaar for re-verification of its mobile customers after it returned Rs 138 crore of LPG subsidy remitted to the unsolicited payments bank accounts.

Furthermore, UIDAI had extended the deadline for Airtel to use the biometric identity for re-verification of its mobile customers till 31 March. Airtel Payments Bank had, however, maintained that no bank account was opened without the consent of the customers.

During the controversy, Bharti Airtel’s Payments Bank MD and CEO, Shashi Arora quit the firm.

To find out the lapses behind UIDAI allegations, the firm had also launched an internal probe and terminated relationships with nearly 1,000 retailers for not following the due process while signing up customers.

Of late, the firm also announced to slash the interest rate by basis points (BPS) to 5.5 per cent. Earlier, it was offered at interest rates as high as 7.25 per cent. The payments bank justified the interest cut as an end of the introductory offer.