Credit line

Fintech firms seek six-month extension to comply with RBI credit line standards

Fintech companies will seek an extension of at least six months to comply with the latest mandate from the Reserve Bank of India, which prohibits non-bank wallets and prepaid cards from offering lines of credit on Fintech platforms.

At a meeting hosted by the Digital Lenders Association of India (DLAI) on Thursday, two people agreed that the extension request was the “most critical” part of the ongoing problem, The economic period reported.

It came after a HEY Wednesday’s report said the fintech industry association planned to present a petition to the central government and the RBI, seeking justification for the central bank’s circular issued earlier this week.

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The RBI has written to some non-bank PPI issuers, stating that this directive does not allow PPI to be loaded from lines of credit. Such a practice, if followed, must be stopped immediately. And, non-compliance can result in 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-branded cards have come in advance, giving businesses time to react. Monday’s memo on non-bank prepaid payment instruments (PPI) comes into effect immediately,” one of the people in the meeting said, The economic period cited.

Another person familiar with fintech company discussions said HEY“The representation asking for an extension to the compliance deadline also shows that the industry is responsible and trying to do the right thing.”

The latest meeting brought together representatives from credit card challenger companies Slice and Uni Cards, among others. The corporate representation will also highlight how fintechs have promoted financial inclusion.

“They will try to explain to the RBI that these business models have been in the market for a few years now and have been extended to five to eight million customers,” HEY quoted one of the sources, who is aware of the main talking points.

RBI’s latest tenure comes as credit card challengers have seen investments of more than $500 million over the past 18 months led by Tiger Global, Insight Partners, General Catalyst and others.

A fintech startup founder said HEY“I can tell you that fintech investors are really scared. This is not just about the latest circular, but about the regulator’s next step – if more lenders will have to change their business model or even scale down their operations in based on new guidelines on fintech loans expected in the coming weeks.”