“It is good that the direction has come because otherwise there would have been a lot of hardship caused to a lot of wallet users,” said Pramod Saxena, founder and chairman, Oxigen Services India, adding, “What we needed really is a KYC regime that allows a faster process. The eKYC process should be such that people do not have to take the trouble of physically going and presenting documents.”

Vinay Kalantri, founder and managing director, tmw Fintech, said the industry is hoping for the regulator to come out with an alternative to resolve the vexed issue of KYC. “A possible alternative may lie in setting up of a central KYC registry or a common pool of information which will be open to private business,” he observed.

Banks and fintech companies have been waiting for the RBI to respond to their request for guidelines governing the eKYC process for their customers ever since the Supreme Court’s September 2018 judgment restricted the use of compulsory Aadhaar-based authentication for the purpose of accessing government subsidies.

As per the Master Direction on Issuance and Operation of Prepaid Payment Instruments (PPIs), issued by the central bank on October 11, 2017, PPI issuers were required to complete the KYC process by February 28, 2019. The new deadline will now be August 28, 2019.

“Based on requests received from various stakeholders to extend the above timeline on account of difficulties in undertaking Aadhaar e-KYC and time necessary to put in place alternative systems for completing the KYC process, it has been decided to allow PPI issuers additional time of six months for completion of the KYC process,” the RBI said in a late night notification on Monday.

The extension of the timeline does bring some relief to PPI issuers as it means they do not have to immediately eliminate the accounts of the large number of wallet users who remain outside KYC coverage. Industry participants believe such users constitute anywhere between 70% and 75% of the total pie of wallet users.

Nonetheless, payment firms said the move was a welcome one. Upasana Taku, co-founder and director, MobiKwik, said, “This is a welcome announcement as it gives us more time for completing the full KYC process for our users. We also urge RBI to allow alternative KYC tools to PPI issuers as this will further boost the growth of digital payments in the country.”

Data released earlier this month by the RBI shows that PPIs recorded 441.77 million transactions in December 2018, up 38% year-on-year (y-o-y).