EDEN IAS

RBI’S CREDIT LINE NOTIFICATION

UPSC CURRENT AFFAIRS | RBI’S CREDIT LINE NOTIFICATION | 21ST JUNE | INDIAN EXPRESS

SYLLABUS SECTION:

WHY IN THE NEWS?

Recently, the RBI’S CREDIT LINE NOTIFICATION issued a notification disallowing non-bank prepaid wallets and prepaid cards from loading credit lines.

MORE DETAILS:

  • RBI has clarified that its master direction on prepaid payment instruments (PPIs) does not permit the loading of PPIs from credit lines.
  • It is a practice being undertaken by several fintech credit card companies | RBI’S CREDIT LINE NOTIFICATION.
  • These companies typically tie-up with banks or NBFCs and offer credit lines into their prepaid wallets.
  • Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007

What are PPIs?

  • The RBI defines prepaid payment instruments (PPIs) as payment instruments that facilitate the buying of goods and services, including the transfer of funds, financial services, and remittances, against the value stored within or on the instrument.
  • PPIs are in the form of payment wallets, smart cards, mobile wallets, magnetic chips, vouchers, etc. As per the regulations, banks and NBFCs can issue PPIs.
What is a credit line?
  • A credit line is a preset borrowing limit that allows an individual or business access to credit at any time, as per need.
  • It can be tap into by the customer till the limit offer is not exceed.
  • It is like a flexible loan as against a lump-sum loan where a fixed amount is borrow.
Why has the RBI issued this notification?
  • With credit products infiltrating the market, there is a renewed push by the regulator to clamp down in the interest of consumer safety.
  • While some fintech tie-up with banks like SBM Bank, RBL Bank, Federal Bank, etc. to offer these products, some tie-up with NBFCs.
Fintechs offered credit products in India:
  • Companies like Paytm, Amazon Pay, LazyPay, Simpl, etc offer postpaid wallets with small credit lines.
  • Others such as Slice, Uni, Fi, OneCard, etc. offer credit cards in partnership with banks and NBFCs.

Read more: UPSC CURRENT AFFAIRS

SOURCE: INDIAN EXPRESS