Non-banks not allowed to load credit lines on prepaid wallets, cards

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In a circular addressed to the non-bank PPI issuers, the RBI said, “The PPI- master direction 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”.

The signal from India’s central bank seems to be that it wants to put a full stop to buy-now-pay-later (BNPL) wallets which typically tie-up with banks or Non-Banking Financial Companies (NBFC) and offer credit lines or a short loan into the prepaid wallet. The problem is that many times users don’t realise the wallet amount is a loan and end up paying a high interest for the money spent.

According to the RBI, there are over 35 non-bank PPI issuers in the country, including Amazon Pay, Bajaj Finance, Ola Financial Services, PayU Payments Pvt Ltd, and Phone Pe Pvt Ltd. In simple terms, loading Ola Money or Amazon Pay using a credit or a debit card is allowed. However, taking a line of credit from an NBFC and loading the wallet of the consumer is now banned.

This move will most likely impact loan lending platforms like Slice and Uni that provide on-tap loans and send it to the payment wallet of the users directly. Any wallet that essentially uses NBFCs for disbursing gold loans, personal loans and even microfinance loans through wallets will be impacted by the RBI’s circular.

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