RBI Warns Against Using Credit Lines To Top Up Prepaid Instruments

The Reserve Bank of India has asked non-bank prepaid instrument issuers to stop loading wallets and other prepaid instruments through credit lines. In a communication to prepaid instrument issuers dated June 20, the banking regulator has said that its master directions do not allow this.

“The PPI-MD does not allow loading of PPIs from credit lines. Such practices if followed, should be stopped immediately,” the regulator said in its communication, and emphasised that it will take action in case of non-compliance.

BQ Prime has reviewed a copy of the communication.

The master directions state that PPI issuers may allow loading or reloading of prepaid instruments by “cash, debit to a bank account, credit and debit cards, prepaid instruments (as permitted from time to time) and other prepaid instruments issued by regulated entities…”

According to a person with direct knowledge of the matter, this will affect prepaid instrument issuers who have built a lending ecosystem around their wallets. Under such arrangements, the issuers load a customer’s wallet through a temporary credit line to users. This credit line is offered by a partnering non-banking finance company or bank. The customers can then use the funds in their wallet and repay the loan over time. Those issuing prepaid cards, branded as credit cards, will also likely be impacted.

The prepaid instrument industry is still seeking some clarity from the regulator on finer issues, the person quoted above said.

According to data available with the RBI, there are 37 non-bank PPI issuers in the market. These include Amazon Pay, Bajaj Finance, Ebix Payment Services, Manappuram Finance, Ola Financial Services, and One Mobikwik, among other issuers.