MUMBAI: The RBI on Monday that issuers of prepaid instruments (wallets) cannot allow them to be loaded via lines of credit.
The difference between credit and a line of credit is that the funds are deposited into the borrower’s account, whose rate meter starts ticking the moment the funds land. With a credit line, the bank makes funds available to the customer, but these only become credit when the borrower withdraws the money.
This follows certain wallet providers that include an option that allows a user with no funds to pay later by providing a line of credit. In a circular to all Non-Bank Prepaid Payment Instrument (PPI) issuers, RBI said its policies allow PPIs to be issued either by cash, debiting a bank account, credit and debit cards and other payment inrupees.
Bankers said the RBI passed light regulations for small-ticket loans, including “buy now, pay later.” However, it insists that providers make it clear to the borrower who the lender is and what the borrowing costs are. Earlier this year, the central bank requested information on banks’ first-loss guarantee (FLDG) risk. FLDG refers to the loan guarantee given to a regulated lender by a non-regulated entity.
FacebookTwitterInstagramKOO APPYOUTUBE