RBI’s Guidelines For BNPL And Digital Lenders To Come This Month

SUMMARY

A source said that RBI’s circular can be out as early as next week

In late June, the Central bank commanded non-prepaid payment instruments (PPIs) to stop offering small amount loans to consumers

Earlier, to seek clarity on the non-PPI guidelines, many fintech industry bodies such as PCI, FICCI and DLAI reached out to the central bank

Fintech lenders, which were earlier disallowed to load credit lines, will be seeing new RBI guidelines for buy now, pay later (BNPL) and digital lenders coming this month.

The Financial Express reported a source saying that RBI’s circular can be out as early as next week.

In late June, the Central bank commanded non-prepaid payment instruments (PPIs) to stop offering small amount loans to consumers.

It also stated that PPI-MD would only permit these instruments “to be loaded by cash, debit to a bank account, credit and debit cards, PPIs and other payment instruments issued by regulated entities in India and shall be in INR only”.

According to a report by Dvara Research, terms and conditions laid by BNPL players misalign with the set customer protection regulations of India. As a result, customers incur different costs before and after defaulting loan repayments and pay interest rates as high as 36%.

The RBI’s new guidelines for BNPL players are expected to consider industry trends of BNPL segment and accordingly, frame new regulations.

The central bank’s previous notification impacted several fintech lenders such as Jupiter, slice, MobiKwik, Capital Float,and Fi, among others. It pushed fintech lenders to cease offering loans or mulled over pivoting their business. It further caused ambiguity among digital lenders and BNPL players as they were uncertain of their future in the country.

To seek clarity regarding the non-PPI guidelines, many fintech industry bodies such as the Payment Council of India (PCI), Federation of Indian Chambers of Commerce and Industry (FICCI) and Digital Lenders’ Association of India (DLAI) reached out to the central bank.

Besides, the fintech industry bodies also requested the RBI to give a six-month extension to comply with the new PPI guidelines.

As per an Inc42 report, India’s fintech industry is estimated to touch $1.3 Tn mark by 2025. Of this, the BNPL segment is anticipated to be a high-yielding segment in the fintech space, surging 11X to $43 Bn by 2025, at a CAGR of 80% by 2025.

However, the projected growth of the BNPL segment will be affected by the RBI’s moves. The central bank’s new guidelines for the BNPL segment will not only regulate the sector and also, reshape it all together.