RBI vs. card-based fintech firms: what the central bank diktat means for the future of PPI lending

Some founders of fintech startups allege that the RBI has clipped the wings of potential unicorns with its decision. Illustration by Manali Ghosh.

Synopsis
The RBI has hit the pause button on the rapid growth of card-based fintech startups with its recent circular. The move, which saw several startups ending up on the wrong side of the law overnight, has created some resentment among entrepreneurs. But with RBI’s guidelines on digital lending expected shortly, more clarity will emerge on the future of such fintechs.

Last week, the Reserve Bank of India (RBI) said in a circular that non-bank prepaid payment instruments (PPI) cannot be loaded with a credit line. The decision sent shock waves through mobile-wallets and buy-now-pay-later (BNPL) platforms that offer credit lines to customers. Following the central bank’s directive, neobanking firm Jupiter stopped issuing its Edge ‘credit cards’ challenger while KreditBee, LazyPay, and Kissht also stopped issuing

( Originally published on Jun 28, 2022 )