The Reserve Bank of India’s (RBI) is believed to be inspecting the “buy now pay later” (BNPL) providers and pre-paid fee devices (PPIs) resembling wallets.
The central financial institution is anxious about PPIs being loaded by means of traces of credit score, because it may lead to systemic dangers. New age monetary gamers have been utilizing traces of credit score from banks and non-banking monetary firms (NBFCs) to load clients’ wallets. The central financial institution seems to be apprehensive enough due diligence is probably not going down whereas the PPIs are being loaded.
The RBI, they careworn, encourages innovation nevertheless it shouldn’t be based mostly on regulatory arbitrage.
Persons, aware of the matter, level out the RBI just isn’t against PPIs being loaded by debit card, money, debits from banking accounts, because it believes that to supply a line of credit score, the entity must have a licence. As Fintechs don’t have the licence to lend, the central financial institution believes, they don’t seem to be working inside the authorized framework. The individuals additionally mentioned that there are some considerations on information safety and privateness as a result of the possession of the client just isn’t all the time clear.
Earlier this week, the central financial institution got here out with a round barring non-bank establishments or fintech firms from loading credit score traces onto PPIs, warning them of heavy penalty in the event that they proceed to supply such providers. The transfer got here after some fintech companies began utilizing credit score traces from banks or NBFCs to load the wallets of shoppers.
The directive is predicted to hit the enterprise fashions of a rising variety of fintech companies, together with Slice, PayU’s LazyPay and KreditBee.
Sources mentioned the central financial institution believes that the monetary entities that mimic banks (by enterprise sure core features of banks like credit score disbursement) however should not topic to comparable stringent norms and licensing requirement can’t be permitted to take action. This is as a result of if they’re allowed to resort to such practices, they may more than likely threaten the well being of the broader banking system and, on the identical time, undermine the client safety mechanism. Against this backdrop, the RBI is learnt to be inspecting such merchandise.
Meanwhile, sources mentioned a few of the trade gamers are approaching the RBI to supply them as much as a yr, by means of some form of a sundown clause, to cease these schemes which have change into well-liked, particularly after the Covid outbreak.
As reported by FE, the fintech lending trade is more likely to request the RBI to use a one-year grandfathering clause to its new round barring the loading of wallets with credit score traces. The rest, if permitted, would permit lenders who’ve pay as you go card-based outstandings to easily migrate their present clients to a special mode of credit score issuance. Digital Lenders Association of India and Fintech Association for Consumer Empowerment are holding discussions with their members in regards to the communications to be despatched to the RBI.
Source: www.financialexpress.com”