Fintech firms will seek an extension of at least six months to comply with the latest mandate of the Reserve Bank of India, which barred non-bank wallets and prepaid cards from offering credit lines on fintech platforms.
In a meeting held on Thursday arranged by the Digital Lenders Association of India (DLAI), two people agreed that the request for an extension was the ‘most critical’ part of the ongoing issue, The Economic Times reported.
This came after an ET report on Wednesday said that the fintech industry association was planning to petition the central government and the RBI, seeking the rationale for the central bank’s circular issued earlier this week.
The RBI wrote to some non-bank PPI issuers, stating that this direction did not permit loading PPIs from credit lines. Such practice, if followed, should be stopped immediately. And, non-compliance may attract action under the Payment and Settlement Systems Act, 2007, the central bank said.
“This is very critical as other RBI guidelines like the one on co-branding cards came in advance, giving time to companies to react. Monday’s note on non-bank prepaid payments instruments (PPIs) is effective immediately,” one of the people in the meeting said, The Economic Times quoted.
Another person, aware of the fintech firms’ discussions, told ET, “The representation seeking an extension on compliance timeline also shows the industry is responsible and is trying to do the right thing.”
The latest meeting was attended by representatives of credit card challenger firms Slice and Uni Cards, among others. The firms’ representation will also highlight how fintechs have promoted financial inclusion.
“They will try to explain to the RBI that these business models have been around in the market for a few years now and have been scaled to five to eight million customers,” ET quoted one of the sources, who is aware of the top talking points.
RBI’s latest mandate comes when credit card challengers have seen investments of over $500 million in the past 18 months led by Tiger Global, Insight Partners, General Catalyst and others.
A fintech startup founder told ET, “I can tell you fintech investors are really spooked. It is not about just the latest circular but about what’s next from the regulator — whether more lending companies will have to change business models or even shrink their operations based on new guidelines on fintech lending expected in the coming weeks.”