Reserve Bank of India disallows credit lines for non-bank prepaid instruments

Wednesday 22 June 2022 14:22 CET | News

The Reserve Bank of India (RBI) has issued a notification disallowing non-bank prepaid wallets and prepaid cards from loading credit lines into these platforms.

This comes in the backdrop of a boom in credit instruments such as fintech-driven credit cards and Buy Now, Pay Later (BNPL) wallets.

The banking regulator has clarified that its master direction on prepaid payment instruments (PPIs) does not permit loading of PPIs from credit lines – a practice being undertaken by fintech credit card companies. These companies typically tie up with banks or NBFCs and offer credit lines into their prepaid wallets.

The RBI defines prepaid payment instruments (PPIs) as payment instruments that facilitate the buying of goods and services, including the transfer of funds, financial services, and remittances, against the value stored within or on the instrument. PPIs are in the form of payment wallets, smart cards, mobile wallets, magnetic chips, vouchers, etc.

With credit products infiltrating the market, there is a renewed push by the regulator to clampdown in the interest of consumer safety. While some fintechs tie up with banks like SBM Bank, RBL Bank, Federal Bank to offer these products, some tie up with NBFCs. In some cases, the credit lines are also extended by the fintech’s NBFC partners. 

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Keywords: banks, prepaid card, regulation, fintech, credit card
Categories: Banking & Fintech
Companies: Bank of India
Countries: India
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