Payments Council seeks government help post RBI’s fintech order

The council – under the Internet and Mobile Association of India (IAMAI) – said wallets that comply fully with know your customer (KYC) norms should be treated on par with bank accounts, and that they should be allowed to disburse credit.

ET has reviewed a copy of the letter.

The council had last week sought inputs from fintech firms and digital lending startups following the RBI diktat.

PCI said that “a drawdown by the customer from a non-revolving credit line (which has been given by a regulated lender) should be allowed to be disbursed into a full KYC PPI.”

This essentially means that it is seeking a reversal of the RBI order published last week.

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A non-revolving credit line is a concept where the credit is ‘non-replenishable’ unless the customer is being underwritten again for a new credit line and has a clear repayment schedule with no minimum due.

ET
reported on June 22 that the top digital finance companies, including credit-card challenger brands and lending firms, would jointly petition the government and the central bank for clarity on the directive.

ET
also reported that RBI’s circular had come after commercial banks raised concerns over likely breach of rules, including anti-money laundering (AML) and KYC guidelines, by the fintech companies.

In the letter, PCI explained the various models of using PPIs for disbursing loans to customers. It also said disbursing loans on a wallet or PPI helps lenders to better control how the loan is used versus running the risk of misuse if it is given out in cash.

The use of a PPI, like a card, is restricted to merchant category codes that are supported and assigned by card networks including Visa, Mastercard and RuPay, it said.

This helps a non-banking finance company (NBFC) in ensuring that the loan is being used for its intended purpose.

“Where a credit line is disbursed into a PPI wallet, the issued and active cards are well more than 10 million and the payment volume processed for the month of May is over Rs 3,500 crore,” PCI said in the letter.

It said further that the current model of disbursing loans through a PPI has led to greater financial inclusion and movement towards a cashless future.

ET reported last week that fintech firms, along with the Digital Lenders’ Association of India (DLAI), had reached out to the government and the banking regulator seeking a
minimum six-month extension to comply with the new mandate.

To be sure, officials aware of the central bank’s thinking have said that the ban on loading wallets with credit lines is applicable to both bank as well as non-bank PPI products.

This is based on a clarification provided by the regulator last week to queries from certain fintech firms.

In their consultation with the RBI and stakeholders, the fintech firms also highlighted the issue of a lack of representation in various committees and working groups that decide on the policy framework for the fintech industry.

Industry sources have told ET that credit card startups, such as Tiger Global-backed unicorn Slice and Uni Cards, were more likely to be impacted by the regulator’s move.

Tiger Global, Insight Partners, General Catalyst and others have invested more than $500 million in challenger credit card companies over the last 18 months.