According to the RBI’s regulations, any organisation providing fintech services in India must be registered with the RBI. According to Section 45-IA of the RBI Act, no NBFC may initiate or conduct non-banking financial institution business without first obtaining a certificate of registration from the RBI.
On June 20, the RBI prohibited non-banking wallets and prepaid cards from loading credit lines onto these platforms. The regulator directed them to stop such practices immediately in a one-page circular addressing non-banking prepaid payment instruments (PPIs).
According to the PPI-MD, loading PPIs from credit lines is not permitted. Any failure to comply in this regard may result in a fine. The directive has caused widespread consternation in the payments industry. It came after it expressed concern about new-age companies assuming the role of lenders.
The government supports the Reserve Bank of India’s recent move prohibiting non-bank prepaid payment issuers from loading credit lines onto their products. The government also wants a comprehensive regulatory framework for the fintech sector, which has recently seen several complaints of potential breaches in prudential norms.
According to government officials, the RBI order, which was published late Monday, came after commercial lenders raised concerns with the banking regulator about potential rule violations by fintech companies.
Banks had raised worries with the RBI on potential breaks against illegal tax avoidance rules, and loosened Know Your Customer standards by fintech organizations, an authority mindful of the matter told ET.
Shields concerned government also needs a more controlled system for the fintech area, said the authority, adding that the RBI is in conversations with all partners on the issue. A more thorough rule is normal later on, the authority added.
The few trendy fintech organizations accepted the job of loan specialists, without building sufficient shields, which may have provoked the financial controller to force checks on fintech organizations utilizing prepaid instruments to channel credit, ET reported Wednesday.
The installment business, on the other hand, interpreted the request as the national banks’ virtual endorsement that banks would be critical overseers of the area’s advancement stack, potentially harming their business case.
The Reserve Bank of India (RBI) has stated that credit activity outside the scope of prudential regulation may render its countercyclical policies ineffective. According to an organisation observer, some firms have temporarily disabled future transactions to adjust to the RBI’s order.
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