RBI Stops Non-Banks From Issuing Credit Line To Users: How Will This Impact You?
Giving a blow to several fintech players, the Reserve bank of India asked the non-bank prepaid instruments (PPIs) issuers to not load these with a credit line, a preset borrowing limit, on Tuesday.
How Does This Affect?
With this move, India’s central bank wants to put a full stop to buy-now-pay-later (BNPL) wallets which typically tie-up with banks or Non-Banking Financial Companies (NBFC) to offer credit lines or a short loan into the prepaid wallet.
And why not, as while opting for this option, the users don’t even realize the wallet amount is a loan and end up paying a high interest for the money spent.
This would affect many of these BNPL schemes as they will have to stop post the RBI order, said the industry expert.
Further adding, “RBI’s recent circular will impact the growth of digital lending, especially in the BNPL category. Buy now pay later schemes offered by all non-bank PPIs will come to a grinding halt. Fintechs and neobanks who were circumventing rules by taking bank’s PPI and offering credit lines with the help of NBFC partners will face the music,”.
What About BNPL Schemes?
It is noteworthy here that the BNPL schemes through bank card BNPL players like HDFC Flexipay, ICICI Paylater, HDFC Payzapp, SBI YONO, ICICI Pockets will not have any impact and continue as it is.
So far, there are over 35 non-bank PPI issuers in the country, including Amazon Pay, Bajaj Finance, Ola Financial Services, PayU Payments Pvt Ltd, and Phone Pe Pvt Ltd, said RBUI.
In simple words, the loading of Ola Money or Amazon Pay using a credit or a debit card is allowed.
At the same time, taking a line of credit from an NBFC and loading the wallet of the consumer is now banned.
A Blow To Loan Lending Platforms
This move is likely to affect the loan lending platforms including Slice and Uni that provide on-tap loans and send it to the payment wallet of the users directly.
In addition to that, the wallets which essentially use NBFCs for disbursing gold loans, personal loans and even microfinance loans through wallets will be impacted by the RBI’s circular.
Further, Amazon Pay Later could also be impacted with these updates.
As this facility offers instant credit which can be utilized for buying a product on the platform and can be paid in easy EMIs.
Regarding this, Paytm claims that it won’t be affected as it has its own scheduled Paytm Payments Bank approved in 2021.
But, it appears that the RBI order has caused some confusion and many companies are still figuring out how their products are impacted.