MobiKwik Cancels 6% Wallet Interest Scheme As RBI Stops Them From Turning Into A Digital Bank

The introduction of mobile wallets in India is changing several things at the same time; and such is the magnitude of their expanse, that banks are now threatened by their growth. In order to counter their reach and popularity, banks are now launching their own payment tools and mobile wallets so that their customers don’t ditch their platforms.

ICICI’s Pockets, SBI’s Buddy, Axis’ Lime, HDFC Bank’s PayZapp etc are perfect examples of how private mobile wallets have inspired banks to adopt mobile technology in a massive way.

Amidst this chaos, when a mobile wallet decides to launch financial products like banks, then more confusion ensures.

MobiKwik’s 6% Annual Interest Plan Stopped By RBI

MobiKwik, one of the three largest mobile wallets in India right now, recently launched a scheme wherein their users can earn 6% interest on the money parked inside their wallets. This scheme was launched only for those customers who decides to maintain wallet balance above Rs 5000.

Hence, by parking Rs 5000 in MobiKwik wallet, the user can earn Rs 300 per year, which would be given back in terms of shopping incentives and others benefits. This is similar to what banks offers in terms of their saving accounts.

After Reserve Bank of India (RBI) learnt of this scheme, they quickly ordered MobiKwik to stop this offer. Immediately all advertisements related with this scheme was withdrawn by MobiKwik.

RBI said, “Mobile wallet companies are not permitted to mobilise funds/deposits by offering cash back in nature of interest etc. To our knowledge the entity (Mobikwik) is no more allowing/offering such product.”

MobiKwik Turning Into Digital Bank?

Interestingly, while announcing the launch of this few scheme last week, MobiKwik had shared that they will want to become a ‘Digital Bank’ soon. Last month, MobiKwik partnered with CashCare to offer small, micro-loans of amounts ranging from Rs 500 to Rs 2500.

MobiKwik co-founder Upasana Taku had said, “These are micro loans, about Rs.500-2,500, given to users when they are running short on balance while making a purchase. We are happy with the product, the repayment rates are around 97%. We are now looking at expanding this,”

It is not clear whether such loan products would be allowed by RBI or not; or whether offering such micro-loans are allowed for mobile wallets.

MobiKwik started the ‘6% annual interest’ plan using a RBI loophole pertaining to mobile wallets and escrow accounts. As per the guidelines from RBI, “The entity can enter into an agreement with the bank where escrow account is maintained, to transfer “core portion” of the amount, in the escrow account to a separate account on which interest is payable..”

After RBI stopped MobiKwik from executing 6% interest plan, it seems they will change their guidelines for such entities which can use escrow accounts for gaining interest.

MobiKwik has refused to comment on this development.

Bipin Preet Singh, Founder and CEO said in regards to this development, “MobiKwik is the most rewarding loyalty platform for users. Loyalty points, incentives, cashbacks, etc. are among the benefits to MobiKwik users for going cashless. We launched the profit cashback offer as part of an overall package of incentives, to reward our existing users and encourage more users to load & therefore transact on MobiKwik. There were certain concerns on the language of the campaign that were flagged to us and we are working with the regulators in resolving these concerns so we can continue with the offer.”