7 - Banking Case Study Two

CASE STUDY
ON
BANKING CASE
(KYC NORMS)
Submitted to: Submitted by:
Prof. R Ravishankar Group – 7
Suprav Saha (18026)
Amitabh Pathak (18032)
Shourya Chatterjee (18060)
Rajdeep Pal (18079)
Masoom Raza (18115)

1)What is the nature of the regulation that Airtel Payments Bank is said to have violated?
Bharti Airtel have been using the Aadhar Based e KYC SIM verification process done while
issuingSIM to customers , to open new accounts in Airtel Payment Banks without the consent
of thecustomers . It is reported that more than 23 lakh Airtel customers has received around Rs
47 croresin their payment bank accounts without their knowledge . According to RBI this a
clear violation ofthe “ Operating Guidelines for Payments Banks “ and central bank's
regulations related to detection and reporting of counterfeit notes .
These regulation states that these banks cannot use the KYCs of the customers for any
otherpurpose other than checking the authenticity of the proofs filled in by the customers ,
without their consent .
Q2) The regulation is important because KYC norms help the customers to protecttheir
bank account against any misuse by the third party and it also provides security to the
concerned account holders?
Ans-At the time of preparing any framework for their KYC policies Banks generally follow
certain guidelines; These framework ensures safety to the customers. These are
 Acceptance of policy by the customer – This ensures that guidelines are in place for
acceptance of customers.
 Identification procedures for customers – Identity of the customers are being verified
by using reliable data or information.
 Transactions should be monitored - The normal activity of a customer are to be
understood and observed by the Payment banks, to identify transactions that are
outside the normal activity pattern.
 Management of risk - Appropriate procedures are to be established for ensuring their
effective implementation.
KYC is also important for tackling money laundering; resistance of finance terrorism; risk
management and checking of identity theft.

Q3) The regulation issued by RBI which has been violated by Airtel Payment Bank is
being described below?
Ans-Payment Banks should ensure that all the customers comply with the KYC regulations,
including customers of mobile companies, which includes simplification of account opening
procedures. It is to be clarified here that if the KYC done by a telecom company and it is a
promoter group entity of the Payment Bank, matches the quality as prescribed for a banking
company as specified by RBI, Payment Banks, from that telecom company, might obtain the
KYC details of the customers, subject to the consent of the customers.
Payment Banks might, at their disposition, like all other banks, decide not to take the physical
signature while opening accounts and instead depend on the electronic verification of the
terms and conditions of the banking relationship/account relationship if the bank has
confidence in the legal authenticity of such electronic verification . However, every
regulations with regard to KYC including covering of the Central KYC Registry, and any
upcoming instructions in this relation, will be applicable to Payment Banks just like
commercial banks
After the Airtel case, RBI issued new KYC norms for payment banks. RBI specified that
KYC (know-your-customer) done by telecom companies should not be relied upon. This
means that all the KYC by payments banks, through their telecom operations, for their
customers should be void and null, and a revised KYC should be done for these customers
Q4) What are the banks expected to do to comply with this regulation?
Ans- The banks expected to do to comply with this regulation are as follows:
 Payments Banks should not provide the KYC to any third party .
 They should ensure end to end encryption protection of customer data.
 Revised KYC should be done by the Payment Banks and they should not rely on the
KYC done
 by Telecom companies .
 Banks should intimate the customers whenever they use their KYCs.
 Telecommunication department and Payments bank department of Airtel should
operate in two different platform and should not collide with each other.

7 - Banking Case Study Two

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CASE STUDY

Submitted to: Submitted by:

Prof. R Ravishankar Group – 7

Suprav Saha (18026)

Amitabh Pathak (18032)

Shourya Chatterjee (18060)

Rajdeep Pal (18079)

Masoom Raza (18115)

management and checking of identity theft.

being described below?

including customers of mobile companies, which includes simplification of account opening

KYC details of the customers, subject to the consent of the customers.

confidence in the legal authenticity of such electronic verification . However, every

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