RBI Imposes Penalties on Ola Financial Services, Manappuram Finance, Visa Worldwide for KYC Norm Violations And Unauthorized Payment Methods

Ola Financial Services has been subject to two significant fines from the RBI. The first fine, amounting to ₹33.40 lakh, was imposed due to failures in complying with the KYC directions. The second penalty, amounting to ₹54.15 lakh, was related to deficiencies in regulatory compliance under the Payment and Settlement Systems Act, 2007.

Further, Ola Financial Services reported a shortfall in its escrow account balance and filed an application for compounding this violation.

The Master Direction – Know Your Customer (KYC) Direction, 2016, issued by the Reserve Bank of India (RBI) on February 25, 2016 aims to prevent money laundering and terrorist financing.

A fundamental aspect of the KYC directions is the Customer Identification Procedure (CIP). Financial institutions are required to collect mandatory information from customers, including their name, address, and other identifying details. This information must be verified using reliable, independent sources such as government-issued identification documents.

Manappuram Finance Limited faced a penalty of ₹41.50 lakh for non-compliance with KYC requirements. Similar to Ola Financial Services, Manappuram's failure to adhere to these crucial regulatory directions prompted the RBI to take action.

Visa Worldwide Pte. Ltd. was fined ₹2.4 crore for implementing a payment authentication solution without obtaining the necessary regulatory clearance from the RBI. The central bank had earlier ordered Visa to cease using the unauthorized payment method, which had been in use for some commercial payments.

The "Card Not Present (CNP) transactions – Relaxation in Additional Factor of Authentication (AFA) for payments up to ₹2000/- for card network provided authentication solutions" guidelines issued by the Reserve Bank of India (RBI) on December 6, 2016 allow certain low-value transactions to bypass the additional authentication step that is typically required for online or remote transactions.

Card Not Present (CNP) transactions refer to transactions where the cardholder is not physically present at the point of sale. These transactions usually occur online, via mobile applications, or through other remote means. The relaxation in Additional Factor of Authentication (AFA) applies specifically to transactions where the payment amount does not exceed ₹2000.

Under the guidelines issued on December 6, 2016, the RBI allowed a relaxation of the AFA requirement for small-value CNP transactions up to ₹2000. This means that for transactions within this limit, customers are not required to undergo the additional authentication step.