RBI prohibits non-bank PPIs from loading lines of credit; details here


The Reserve Bank of India (RBI) has banned all non-bank issuers of prepaid payment instruments (PPIs) from charging lines of credit, according to its recent notification. The central bank has ordered PPIs to stop this practice immediately if they haven’t already.

The notification read: “The PPI-MD does not allow the loading of PPIs from credit lines. Such a practice, if followed, must be stopped immediately. Failure to comply in this regard may result in criminal prosecution under the provisions contained in the Payment and Settlement Systems Act 2007. »

It further mentioned: “PPIs shall be permitted to be loaded/reloaded in cash, debited to bank account, credit and debit cards, PPIs (as permitted from time to time) and other payment instruments issued by Indian regulated entities and must be in INR only.

Shortly after the announcement was posted, CEO and co-founder of fintech startup Covnverj Parry Ravindranath said, “I’m no one to give startup gyan, but I think startups and fintech VCs need to be forward-looking in regulation if they are not. not already.

Founder of Wallet Management Service (PMS) Capital Mind Deepak Shenoy tweeted: “So non-bank prepaid wallets are specifically told that they cannot be loaded from a ‘line of credit’ ( as in the case of credit at the request of a lender). This changes business models for NBFC-linked wallets that allowed for a “buy now, pay later” thing with on-demand lending. »

He further stated that NBFCs cannot have accounts that allow you to pay using them and issue cards. He explained, “NBFCs cannot have ‘accounts’ that allow you to pay using them. You can deposit the money in your bank account and pay from the bank. NBFCs are not authorized to issue cards. Wallet providers are not allowed to issue credit. Maybe the idea is that NBFC loans should hit a bank account.

VP of Partnerships and Special Projects of online exam prep app testbook.com Ravisuntanjani Kumar tweeted: “Big Breaking: RBI issues guidelines on PUPs that it cannot be loaded at the help from lines of credit. Fintech founders and VC startup hate me for saying this, but pay later cards are not credit cards but a loan + prepaid card for the end customer.

Harish N of Jar App tweeted that banks such as State Bank of Mauritius will not be affected due to the latest RBI notification. He wrote: “Guys please note who has partnered with banks such as SBM will not be affected I guess. RBI says “non-bank PUPs”, but the justification logic says that RBI will also clarify and tell them to stop it because the essence is that “PUPs cannot be used as credit cards”!”

PPIs refer to instruments that facilitate the purchase of goods and services, the conduct of financial services, enable funds transfer facilities, etc. against the value stored there.

They can be issued by banks and non-banks. While banks can issue PPIs after RBI approval, non-bank PPI issuers are companies incorporated in India and registered under the Companies Act 1956/2013. These entities can operate a payment system for issuing PPI to individuals and/or organizations after receiving RBI authorization, according to the RBI FAQ dated April 11, 2022.


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