The RBI (Reserve Bank of India) has allowed for video-based digital KYC (Know Your Customer) verification in changes to a master direction, while making an amendment in the Prevention of Money Laundering Act, 2002.
This will allow payment companies and non-bank lenders to use video-based KYC as a means of digital verification, to be carried out by authorised officials of the company.
The V-CIP (Video-based Customer Identification Process) will serve as a consent-based alternative for customer onboarding by payment companies and non-bank lenders. The central bank has also allowed the use of Aadhaar for offline KYC verification.
The master direction says that for banks, OTP (one time password)-based Aadhaar e-KYC verification can be carried out by an official of the regulated entity. However, for non-banks, only offline verification of Aadhaar for identification will be allowed.
After the Supreme Court judgement in September 2018, Aadhaar-based e-KYC for fin-tech companies was discontinued. The subsequent cost of offline KYC has been very high and impacted digital lenders. With an amendment to the money-laundering act, entities regulated by the RBI were allowed digital KYC and asked to develop apps for the same.
The changes to the master direction list out the procedure and authorisation required for digital KYC and video-based KYC. For V-CIP, it requires the officials of the regulated entities to be trained for the specific purpose of geo-tagging the videos, apart from maintaining activity log, time and date stamps on the app.
“The video identification promises to replace a more inclusive and extensive physical KYC process. Previously, e-wallet players and non-banks were denied access to the Aadhaar system, restricting their ability to use e-KYC to complete customer verification, increasing the compliance burden,” Ankush Aggarwal, founder of Avail Finance, said in a statement.
He added that the decision provides relief to fin-tech companies and non-banking financial companies as it cuts down costs and does not require service providers to physically reach out to customers.