In a key move that will affect several fintech companies, the Reserve Bank of India (RBI) ordered non-bank prepaid payment instruments (PPIs) to stop loading their PPI instruments, such as wallets and prepaid cards, through credit lines on Monday, 21 June. PPIs are tools that make it easier to purchase goods and services, as well as financial and remittance services, using the value they store.
The RBI has made it clear that loading PPIs from credit lines, a method that is being used by various fintech credit card businesses, is not permitted after the order on PPI.
The central bank reportedly expressed concern over the new-age fintech businesses' apparent assumption of the lender's position without putting in place enough protections, which is why they made the action.
According to the RBI's Master Directions on PPI, PPIs may only be loaded/reloaded in INR by regulated firms in India and may only be done with cash, debit cards, PPIs, and other payment instruments.
As a result of the Master Direction by the RBI, now new-age fintech companies are prohibited from adding credit lines to PPIs, which are devices that by definition shouldn't typically include creditworthiness evaluations.
Following the order, Banks & NBFCs will have to limit the credit lines they offer to these fintech companies in order to load the prepaid instruments.