Uni Succumbs To RBI’s Norms For Non-Bank PPI Issuers; Suspends Card Services

Fintech startup Uni Card on Friday (August 19) said it is temporarily suspending card services for its products – Uni Pay 1/3rd Card and the Uni Pay 1/2 Card. The decision comes in view of the Reserve Bank of India’s (RBI) guidelines that barred non-bank prepaid payment instrument (PPIs) issuers from loading PPIs with credit lines.

Uni Cards said it is “proactively” suspending the card services for its customers, which will begin in phases starting Friday and will be concluded by Monday (August 22).

“Bearing in mind that the Uni Card was used for urgent needs like fee payments, medical bills and emergencies, we have ensured that every one of our customers will have access to their credit line through Uni Cash,” the startup said in a statement.

Uni Cash is built to help customers transfer their credit lines directly and instantly to their bank account, the startup said, adding that it is also extending a zero-charge partial limit on Uni Cash till September 21.

“With a free partial limit enabled, our customers will not face any disruptions while using their funds. We are building something really exciting. Like always, it’s first-of-a-kind and never been done before,” Uni Cards founder and CEO Nitin Gupta said. 

While Uni Pay 1/3rd Card allows users to pay their monthly spends in three parts in three months for no extra charges, Uni Pay ½ Card allows paying in two parts over two months. 

Uni Cards, founded in 2020 by Gupta, Prateek Jindal and Laxmikant Vyas, is a Bengaluru-based fintech startup that offers differentiated credit products to customers. It launched its flagship product Uni Pay 1/3rd Card in June 2021.

The startup recently raised INR 50 Cr through debt financing from venture debt company Stride Ventures after securing $70 Mn (over 530 Cr) in its Series A round led by General Catalyst in December last year.

Uni claims to be currently operating across 130 Indian cities including Bengaluru, Delhi, Mumbai, Hyderabad, Pune, Chennai, Kolkata, Ahmedabad, and Lucknow, among others.

RBI Guideline For PPI Issuers

Of late, the RBI has been tightening the regulations for the fintech sector, and Uni Card’s action is in response to the central bank’s circular for non-bank PPI issuers.

“The PPI-MD (PPI-master direction) does not permit loading of PPIs from credit lines. Such practice, if followed, should be stopped immediately. Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007,” the central bank said in a notification issued to the non-bank PPI issuers on June 20.

Following this, several startups including Jupiter, EarlySalary and KreditBee temporarily halted transactions on their prepaid cards. 

As per recent reports, not only Uni but Slice and LazyPay are also likely to face more trouble as their prepaid card partner State Bank of Mauritius India (SBM Bank India) is planning to pause onboarding of new customers for prepaid cards till there is more clarity on the RBI’s guidelines.

Meanwhile, the RBI slapped a fine of INR 5.93 Lakh on fintech firm Obopay Mobile Technology on Thursday for non-compliance with certain provisions of the Master Directions on PPIs and other issues.

The central bank recently also came out with its first set of guidelines for digital lending.

The Indian fintech market is one of the fastest-growing segments globally, estimated to reach $1.3 Tn by 2025, growing at a compound annual growth rate (CAGR) of 31%, as per an Inc42 report.