Fintech Associations and Startups Request a 6-Month Extension to Meet the RBI's PPI Mandate

Fintech industry associations reportedly seek a six-month grace period from the RBI in a meeting to comply with the central bank's PPI mandate

Fintech industry associations reportedly seek a six-month grace period from the Reserve Bank of India in a meeting to comply with the central bank's latest Prepaid Payment Instruments (PPI) mandate. The central bank told the PPI-MD two days ago that it would not be entitled to load PPIs from credit lines. It acclaimed the PPIs for stopping these credit facilities right away.

An illustrative image of a person holding a credit card while shopping on-line on a computer
Photo by Artur Widak

Moreover, according to the Central Bank, the PPI-MD will only recognise these instruments if they are “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”.

Fintech startups and associated partners are currently confused by the mandate. They expect the central bank to provide more clarity on the mandate so they can analyse how it will affect the fintech sector. Countless fintech associations, including the Internet and Mobile Association of India (IAMAI), the Payments Council of India (PCI), and the Fintech Association for Consumer Empowerment (FACE), recently approached the RBI to discuss these matters related to the RBI's mandate and to ask for an extension on the deadline for PPI compliance.

According to the ET report, the deadline extension request was addressed and finalised at the most recent meeting, which was also attended by major fintech startups. The repercussions of the RBI's order are now evident, as many fintech firms, including Jupiter, EarlySalary, and KreditBee, suspended customer transactions on their prepaid cards yesterday to prevent their partners from being penalised (by the RBI). Prepaid card services are expected to be halted temporarily.

Banking PPIs include, among others, HDFC Flexipay, HDFC Payzapp, ICICI PayLater, and SBI YONO, while non-bank PPIs include online wallets such as Google Pay, MobiKwik, Paytm, PhonePe, Ola Money, Oxigen, and Amazon Pay.

According to a report, many stakeholders anticipate that the RBI's directives will directly influence fintech startups such as Capital Float, LazyPay, Ola Postpaid, Slice, Uni Cards, and MobiKwik. Through this initiative, the central bank has called into question the viability of these dominant business structures in the Indian economy.

India's digital lending industry, which is expected to exceed $600 billion by 2025, is already experiencing low investor sentiment, with fundraisings falling by 45 percent to $1.77 billion in Q1 CY22.