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Indian fintechs request central bank to treat full-KYC PPI same as bank account to survive crackdown – TechCrunch

Payments giants and fintech startups in India on Saturday urged the central bank to treat widely used prepaid payment instruments for customers who have made certain checks on an equal footing with bank accounts, days after the monetary authority signaled an industry-wide crackdown.

The Payments Council of India, a unit of the influential industry association IAMAI, said in a letter to the Reserve Bank of India that regulated lenders can disburse loans if they treat prepaid payment instruments – prepaid shopping cards and wallets – as bank accounts to customers, who have completed their comprehensive Know Your Customer verifications.

The Reserve Bank of India earlier this week notified dozens of fintech startups that it is banning the practice of topping up non-bank prepaid payment instruments (PPIs) using lines of credit, causing panic among many fintechs – and an existential threat to them – has led startups, TechCrunch reported earlier.

Several startups, including Slice, Jupiter, Uni, and KreditBee, have long used PPI licenses to issue cards and then add lines of credit to them. Fintechs typically work with banks to issue cards and then partner with non-bank financial institutions or use their own NBFC entity to offer lines of credit to consumers.

The central bank has long raised concerns about lenders charging exorbitant interest rates and requiring a bare minimum of know-your-customer details to onboard and coerce customers. The industry body appears to draw a line between startups that have acted responsibly and bad actors. (Banks, as well as RBI-backed Rupay, have been disbursing loans to full-KYC PPI accounts for years.)

The Payments Council of India did not name a startup in its letter to RBI – although it used many examples to explain the two popular PPI models and their applications – but it represents almost all payment companies including Mastercard, Visa, Paytm, PayU, PhonePe , Razorpay, Slice, PayPal and Stripe.

It is estimated that fintech startups issue over 600,000 prepaid cards to Indians every month. They have provided access to credit for nearly 10 million Indians, most of whom are otherwise considered uncreditworthy by banks.

The Payments Council of India has also asked the central bank to allow the customer to draw down a non-revolving line of credit to be disbursed into a full KYC PPI.

The lobby group explains the RBI’s PPI models. (Image source TechCrunch)

Two other industry bodies – the Digital Lenders Association and FICCI – have been working on letters to RBI in recent days. On a Zoom call Thursday, dozens of fintech officials discussed the common rationale behind what they should tell RBI. Some of their urgent demands include extending the deadline for the new rule by six months and telling the central bank that the fintech industry as a whole is “responsible and trying to do the right thing,” TechCrunch reported earlier this week, citing several people call.

The RBI and IAMAI did not respond to a request for comment.

Indian fintechs request central bank to treat full-KYC PPI same as bank account to survive crackdown – TechCrunch Source link Indian fintechs request central bank to treat full-KYC PPI same as bank account to survive crackdown – TechCrunch

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