Identity Verification, KYC KYX

Tiered KYC in Indian Payment Banks: Boosting Financial Inclusion

KYC Payment Banks

Navigating KYC Requirements for Payment Banks in India: A Tiered Approach

In India’s dynamic digital finance landscape, Payment Banks play a crucial role in extending banking services to the underbanked and unbanked populations. These banks are at the forefront of a financial revolution, aiming to secure and authenticate transactions through the stringent Know Your Customer (KYC) mandates set by the Reserve Bank of India (RBI). This piece sheds light on a tiered KYC system that can help optimize the onboarding process by Payment Banks, designed to accommodate users from various demographics, from those in need of basic financial tools to those seeking comprehensive banking services.

Simplifying the KYC Process: A Tiered Approach

Recognizing the critical nature of the KYC process in user onboarding, a tiered approach is pivotal in retaining customers who might be deterred by the complexities of KYC compliance. The RBI’s structured KYC framework aims to foster financial inclusion across all societal layers by offering varying levels of account access and services.

Tier 1: Basic Wallet Accounts (Small PPIs)

Functionality: Users can open wallet accounts by submitting an Officially Valid Document (OVD) identification number, capped at a Rs.10,000 balance. These wallets are categorized into two: those that allow cash loading, necessitating full KYC within 24 months, and those without this facility, where full KYC is not required.

Benefits: This tier facilitates quick user onboarding, providing a functional financial tool for immediate use.

Tier 2: Limited Accounts (KYC with/without PAN Card)

Challenges: In less urbanized areas, the absence of PAN cards and mobile numbers linked to Aadhaar OTP validation, this poses a significant barrier to financial inclusion.

Solutions: Payment Banks offer limited accounts using Aadhaar eKYC, with or without a PAN card. For individuals without a PAN card or in the process of obtaining one, Form-60 is an alternative. Aadhaar eKYC can be completed through OTP verification or biometric identification at retail points, eliminating the need for mobile connectivity to Aadhaar.

Account Limit: These accounts have a maximum balance limit of Rs.50,000.

Tier 3: Full KYC Accounts

Procedure: Full KYC requires the addition of a PAN card and completion of a Video KYC (VCIP) or an in-person verification process. The VCIP steps include customer consent, video and photo capture, Aadhaar card verification, geo-tagging for real-time location, image comparison with PAN verification or Aadhaar checks, and a live audio-visual interaction to confirm the authenticity of the video feed. The process concludes with the official storing the recorded video for future reference.

Regulatory Compliance: Beyond customer onboarding, the RBI mandates Payment Banks to maintain a comprehensive KYC policy encompassing customer acceptance, risk management, ongoing diligence, and customer identification procedures.


Payment Banks in India are tasked with a significant challenge: making financial services accessible while ensuring compliance with stringent KYC regulations. By adopting a tiered approach to KYC, these banks can cater to a diverse customer base, ensuring a seamless onboarding experience and fostering greater financial inclusion. This strategic implementation of KYC Verification not only meets regulatory demands but also positions Payment Banks as key players in India’s financial inclusion journey.

Explore IDcentral’s KYC Platform and its Features with a Live DemoRequest a demo

Request a Demo