The Reserve Bank of India on Monday said that all non-banking institutions would not be allowed to load credit lines to prepaid payment instruments such as prepaid wallets and cards.
The change will come into effect on July 1.
The clarification issued by the RBI siad, “The PPI-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.”
It further said that “the PPI MD (Master Direction) shall only be permitted to be loaded/reloaded by cash, debit to a bank account, credit and debit cards, PPIs (as permitted from time to time) and other payment instruments issued by regulated entities in India and shall be in INR only.”
This essentially means that customers now can’t load such wallets/cards with their credit lines. This order will impact fintech players that allow a host of services to the customers including the loading of wallets. Some of these fintechs are in tie-up with banks to offer credit. Slice, Uni, Fi, PayU’s LazyPay, etc. extend credit through prepaid co-branded cards. But here the key issuers of such cards are banks like SBM Bank India, RBL Bank among others, according to a report in Moneycontrol.
Also, in some cases, while the card may have been issued by the bank, the credit line is extended by the fintech’s NBFC partner.
Since the RBI is yet to come out with a detailed notification and clarification, the impact of this move is yet to be ascertained. In a recent interview, RBI Governor Shaktikanta Das said that the central bank would soon come out with norms to regulate the digital payment space and make it safer for the consumers.
According to the RBI, prepaid payment instruments (PPIs) are payment instruments, which 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. Banks and NBFCs can issue PPIs.