RBI says that the firm was ‘operating a semi-closed (non-closed) prepaid instrument through its car-pooling app, sRide, without obtaining the required authorisation from the RBI’
Persons dealing with the startup would be doing so at their own risk, warns RBI
The PSS Act, 2007 provides for the regulation and supervision of payment systems in India and designates RBI as the apex authority for all related matters
The Reserve Bank of India (RBI) has cautioned the general public against carpooling startup, sRide.
In a public statement, RBI said that the firm was ‘operating a semi-closed (non-closed) prepaid instrument through its car-pooling app, sRide, without obtaining the required authorisation from the RBI.’
Essentially, what it means is that the startup has been operating without obtaining required authorisations under the provisions of the Payment and Settlement Systems (PSS) Act, 2007.
The PSS Act, 2007 provides for the regulation and supervision of payment systems in India and designates RBI as the apex authority for all related matters.
Under this, all entities need to obtain a licence or authorisation from the RBI before commencing payment system operations in the country.
Back to the story, the central bank also cautioned that the persons dealing with the startup would be doing so at their own risk.
It further said that, “Members of public are urged to exercise utmost caution while using such applications, dealing with and before parting with their money to any such unauthorised entity.”
“Members of the public should verify themselves that the entity they are dealing with is authorised to carry out the activity it assures to perform”, added RBI.
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sRide was founded in 2014 by Amit Agrawal, Lakshna Chadha Jha and Nitin Chadha. The startup matches riders with vehicle owners in real time, and the cost incurred on account of the fellow passengers is then paid to the vehicle owner.
sRide claims to be present in four cities across India with over one million rides offered till date. The startup also claims to offer services in 8 cities in the United States.
The startup has raised $3 Mn in funding so far from a host of undisclosed investors.
The move is expected to deal a major blow to the startup. The cautionary note by the RBI could spook users and investors alike and could prove to be death knell for the startup.
This comes amidst a growing competition in the shared mobility sector where competitors including Uber and Ola Share, continue to lead the market.
Add to this, a report estimated the shared mobility fleet size in India to grow from 7.02 Mn in 2021 to 9.70 Mn by 2027 at a CAGR of 5.5%.
The same report also stated that the market could witness a major boom, growing at a CAGR of 56.8% between 2020-2025. The revenue too will likely increase from $1,025.8 Mn in 2019 to $3,952.8 Mn by 2025.
This comes amidst a major crackdown by RBI on erring institutions and companies. Earlier today, RBI imposed a total fine of INR 5 Lakhs on three banks for contravention of directions that prohibited acceptance of new deposits.
Earlier in November last year, the central bank had imposed a penalty of INR 2 Cr on Tata Communications Payment Solutions for non-compliance with directions issued under the PSS Act.
The news has raised eyebrows in the markets, with questions being raised like how did the startup operate for so long without necessary licences. The move will also affect the business of the shared mobility app. But, for now, RBI has taken a decision and it remains to be seen what will sRide do.