RBI Restricts Credit Lines on PPIs by Non-bank Fin-techs: Reports
Moneylife Digital Team 21 June 2022
The Reserve Bank of India (RBI) has clarified that non-bank institutions cannot load credit lines on prepaid payment instruments (PPIs) like e-wallets and prepaid cards. This clarification from RBI, which is not available on its website till writing this report, would impact credit products of fin-tech players who extend credit through PPI instruments, say reports.
 
Quoting sources, a report from Moneycontrol says the notification was sent to non-bank PPI issuers, including fin-tech players.
 
"The PPI-master direction (MD) does not permit loading of PPIs from credit lines. Such practice, if followed, should be stopped immediately. Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007," the portal says, citing the RBI notification.
 
According to tech policy and media consultant Prasanto K Roy, postpaid inserted into the wallet may have been a trigger for this—basically, buy now pay later (BNPL)—inserted into a PPI sans clear disclosure.
 
"…with a credit card linked to PPI, there is less confusion in the user's mind. Am I spending from prepaid or credit or BNPL? I have linked a credit card to auto-top-up my Paytm wallet, and I get clear alerts on each auto-debit. On the other hand, if there is a merging line of credit from elsewhere, e.g. I pay via wallet but Paytm merges postpaid into that, I end up happily spending thousands from there without noticing it's a postpaid or BNPL...I end up inadvertently taking a loan," he says in a series of tweets.
 
 
The clarification from RBI could have significant implications for mobile wallets that include a credit line from non-banking financial companies (NBFCs), says a report from Entrackr. While the implication of this move is yet to be analysed, sources say that it could disrupt the operations of well-funded companies such as Slice, Uni and Paytm, it added.
 
Slice and Uni offer pay-later cards, which claim to be credit card challengers and allow users to apply for cards through a 100% digital process through mobile apps. 
 
Quoting a source from the industry, the report says, "This move will not make a difference when a bank is underwriting the loan, but if an NBFC is involved in the underwriting, then wallets will not be allowed to offer credit lines."
 

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