The Reserve Bank of India has fined Airtel Payments Bank just Rs 5 crore for violating Know Your Customers (KYC) norms: a “deficiency in regulatory compliance”. Just to put the penalty in context, between June and October last year Rs 47 crore worth of LPG subsidies were deposited into 23 lakh Airtel Payments Banks accounts after the company had signed up customers without their informed consent. Consumers who are dependent on LPG subsidies may not have the wherewithal to afford LPG cylinders without the subsidy. Considering that Airtel Payments Bank did not issue debit cards and charged customers for cash withdrawals, people were probably left with limited or no access to an essential household commodity. This makes RBI’s Rs 5 crore penalty seem like little more than a slap on the wrist.

Will the unauthorised Payments Banks account remain?

The RBI has said is that this announcement that it “is not intended to pronounce upon the validity of any transaction or agreement entered into by the bank with its customers.” This suggests that those who have been incorrectly been signed up for Airtel Payments Bank will remain their customers unless a separate order is passed. Why? Weren’t the consumers effectively duped into signing up for the payments bank, because informed consent wasn’t taken? Why should Airtel be allowed to retain these customers if they violated norms while signing them up?

The regulator says its penalty follows complaints and adverse media reports alleging that the bank had opened customer accounts without a clear/specific consent of the customers, a supervisory visit to the bank was undertaken by RBI between November 20 and 22, 2017. The statement says that

“After considering the bank’s reply and oral submissions made in the personal hearing, RBI came to the conclusion that the aforesaid charges of non-compliance with RBI guidelines/directions were substantiated and warranted imposition of monetary penalty.”

As with the UIDAI’s Rs 2.5 crore fine, and temporary KYC suspension of Airtel, the RBI’s penalty fails to address key issues: What if it had been a payment company with 50,000 customers instead of millions? Would the RBI have cancelled the payments bank license?

Note that the RBI had issued new guidelines for payments bank to get their customers’ information verified by third parties. This appears to have been done as an attempt to prevent the sort of “piggybacking” that was seen with the Airtel Payments Banks accounts being opened with a barely noticed pre-ticked box.

Historical context: Airtel’s eKYC suspension

In December, the UIDAI suspended Airtel and Airtel Payments Bank from conducting Aadhaar-based verification of customers. This was due to complaints that the telecom company had used the Aadhaar-eKYC based SIM verification process to open payments bank accounts of its subscribers without taking their ‘informed consent’. Such accounts were also linked to get subsidies from the government.

UIDAI, while suspending the e-KYC licence, had imposed a fine of Rs 2.5 crore on the payments bank. Partial e-KYC was then restored for Airtel but only limited to sim verifications.

Timeline of events leading to suspension:

In late September 2017, it was reported that Airtel Payments Bank had opened bank accounts without the informed consent of its customers and receives a notice from UIDAI.

In November 2017, following up on several consumer complaints regarding non-credit of LPG subsidies the Ministry of Petroleum and Natural Gas said that it learnt that the subsidies had been credited their Airtel Payments Bank accounts instead. A sum of over Rs 47 crore was said to have been transacted into the payments bank as part of LPG subsidies.

In December 2017, Airtel deposited an interim penalty of Rs 2.5 crore with the Aadhaar-issuing body UIDAI. The company also assured that it will return the Rs 190 crore that had come into the ‘unsolicited’ payments bank accounts of 31 lakh mobile subscribers.