The Reserve Financial institution of India (RBI) has issued a notification disallowing non-bank pay as you go wallets and pay as you go playing cards from loading credit score traces — preset borrowing limits — into these platforms.
This comes within the backdrop of a increase in credit score devices similar to fintech-driven bank cards and buy-now-pay-later wallets.
What has RBI mentioned in its notification?
The banking regulator has clarified that its grasp path on pay as you go cost devices (PPIs) doesn’t allow loading of PPIs from credit score traces — a follow being undertaken by a number of fintech bank card firms. These firms usually tie up with banks or NBFCs and provide credit score traces into their pay as you go wallets.
“Such follow, if adopted, ought to be stopped instantly. Any non-compliance on this regard could appeal to penal motion underneath provisions contained within the Cost and Settlement Methods Act, 2007,” the RBI famous.
What are PPIs?
The RBI defines pay as you go cost devices (PPIs) as cost devices that facilitate the shopping for of products and companies, together with the switch of funds, monetary companies, and remittances, towards the worth saved inside or on the instrument. PPIs are within the type of cost wallets, good playing cards, cell wallets, magnetic chips, vouchers, and many others. As per the rules, banks and NBFCs can challenge PPIs.
What’s a credit score line?
A credit score line is a preset borrowing restrict that permits a person or a enterprise entry to credit score at any time, as per want. It may be tapped into by the client until the restrict supplied is just not exceeded. It is sort of a versatile mortgage as towards a lump-sum mortgage the place a set quantity is borrowed.
Why has the RBI issued this notification?
With credit score merchandise infiltrating the market, there’s a renewed push by the regulator to clampdown within the curiosity of shopper security. Whereas some fintechs tie up with banks like SBM Financial institution, RBL Financial institution, Federal Financial institution, and many others. to supply these merchandise, some tie up with NBFCs. In some instances, the credit score traces are additionally prolonged by the fintech’s NBFC companions. Not too long ago, RBI Governor Shaktikanta Das had mentioned that the regulator would quickly challenge norms to regulator the digital funds area.
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That are the fintechs providing credit score merchandise in India?
In the present day, most fintechs provide a credit score product alongside their predominant choices. Corporations like Paytm, Amazon Pay, LazyPay, Simpl, and many others provide postpaid wallets with small credit score traces. Others similar to Slice, Uni, Fi, OneCard, and many others. provide bank cards in partnership with banks and NBFCs.