PPI | Credit
Non-banks can't load credit lines into prepaid credit instruments, RBI tells fintechs: Report
The Reserve Bank of India (RBI) on Monday issued a clarification on Prepaid Payment Instruments (PPIs) such as wallets and prepaid cards, stating that they cannot offer credit lines through these instruments, media reports said.
An official notification in this regard is awaited on RBI's website.
"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," read the RBI's clarification, reported Moneycontrol.
PPI-MD stands for Master Direction on Prepaid Payment Instruments. Many companies offer credit lines through these instruments but only through prepaid co-branded cards, whose key-issuers are banks like SBM Bank India, RBL Bank among others.
RBI's clarification can mean that in cases where a bank is not the owner of the prepaid instrument these products cannot be continued. This will also be the case if the RBI doesn't allow NBFCs to extend credit lines through these cards.
According to the Moneyconrol report, the clarification also mentioned that the PPI Master Direction only permits for these instruments "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."
RBI's detailed guidelines on digital lending is awaited and is likely soon.
According to the report, the PPI-MD restricts the role of co-branding entities to marketing and distribution of credit or pre-paid cards, rendering such business models unviable.
In addition, the changes to be effective from July 1 say that co-branding partners shall not have access to information relating to transactions undertaken through the cards, the report added.
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