FACE to seek RBI’s guidance on already issued credit-linked PPI cards

Yatti Soni | | Updated on: Jun 24, 2022

| Photo Credit: SARINYAPINNGAM

Multiple fintech companies have either paused or modified their credit offerings

In the background of the RBI prohibiting funding of PPI with credit lines, Fintech Association for Consumer Empowerment (FACE) said it will engage with the regulators to understand their concerns and also seek their guidance on how to approach cards already issued in the market.

Following the RBI’s letter earlier this week, multiple fintech companies — such as Jupiter Edge, Ola Money and EarlySalary — have either paused or modified their credit offerings. Some fintech firms will reportedly also ask for a six-month extension to comply with the RBI’s new guidelines.  

Sugandh Saxena, CEO of FACE, noted that the association’s first and foremost priority is that its members comply with regulations. Its members include fintech companies such as EarlySalary, Kissht, Yubi (formerly CredAvenue), Paisabazaar, Kreditbee and Chqbook, among others. 

“Given the enormous diversity within fintech lending, our understanding is the impact is limited to a much smaller set of players within the fintech lending universe. The effect is not significant for FACE members, primarily in short-term loans for personal and business,” she added. Kunal Varma, CEO & Co Founder, Freo, also believes that fintech is a very big and diverse sector and the impact will be confined to a certain set of players within this universe. 

Earlier this week, the RBI said in a letter to non-bank prepaid payment instrument (PPI) issuers that the Master Direction on PPI does not permit the 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 letter added. 

Following this, many fintech companies have either paused or modified their services. For instance, EarlySalary temporarily disabled all future transactions for customers and said in a message to its users “to comply with a change in RBI rules, your SalaryCard is undergoing change and all future transactions are temporarily disabled. We assure you this is a step towards providing a safe experience”. 

Similarly, Ola Money, which earlier allowed the customer to use their postpaid balance on Ola Money card/wallet, has disabled the provision after the RBI’s new guideline. Buy Now Pay Later offering Jupiter Edge has also informed users recently that it is pausing services because of the recent guidelines received from the RBI. “Please be assured that we are in the process of evaluation and we shall notify you once we are back to normal,” the company added. 

The former co-founder and MD of fintech start-up BharatPe, Ashneer Grover, sees the RBI’s move as “a way to protect bank’s lazy credit card business from fintech’s potent BNPL business. It’s a flex move by banks - rent seeking. But market is market and regulation will eventually come around to what market needs”.

Commenting on the way forward for the industry, a spokesperson from Digital Lenders Association of India, which represents members such as Zest, UNI and Paytm, said: “Digital Lenders Association of India (DLAI) and all its members are committed to being in full compliance with both the letter and the spirit of all regulations. DLAI will engage deeply with all regulators to ensure that its members meet the goals of financial inclusion and efficient intermediation of credit while being in strict compliance with all regulations.”

Published on June 24, 2022
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