Thu. Jul 14th, 2022

Reserve Bank of India (RBI) has barred all non-bank prepaid payment instrument (PPI) issuers from loading credit lines, according to its recent notification. The central bank directed PPIs to stop this practice immediately if not done already.

What all possible options do exists with Buy Now Pay Later Players? BNPL products has evolved a lot in past 2 years. Currently most of the BNPL organisations stopped their onboarding. Is the transactions legitimate on existing BNPL cards? As RBI has not issues w.r.t onboarding, but the regulation is more aligned towards the BNPL transactions. Then why these BNPL organisations has not supported the transactions?

This might be due to misinterpretation of the regulations. Now the questions exists, RBI will penalise issuer, Company or TSP for enabling these transactions? Ideally it should be all.

If every transactions, creating the loan every-time, it’s admissible under the RBI new regulation. If during transactions it reduce the balance then it should not be. This is our interpretation for the recent RBI regulation.20.6

Now the question is that BNPL organisations has customer base of 50K to 5L, What they should do now? Here are couple of options

  1. Sell there customer base to Bank, where bank can provide the credit card to them
    1. Is all the customer base sellable? No, Company do offer cards to customer having lower CIBIL score, defaults on other cards. Compliance regulations vary from company to company.
  2. Change existing product – Overdraft account
    1. An Overdraft account is similar to current account. On this account, Interest is accrue on utilised funds. Now the question, what should be the Interest? Can BNPL company charge 0% ROI. How Pay in 3/2 will work?
  3. Change existing product – Credit card
    1. A Credit card is simpler & easy way to retain your customers. No doubts, Customer needs to complete the onboarding again, to gain new Card. Whether all customers will be migrated during this process? No, As due to compliance & regulation, some customers will be dropped. To enable Bank to support this huge monthly turnover, existing Lenders needs to support the BNPL Players.

Putting all these options, RBI regulations has impacted the BNPL players. The above regulation is to ensure customer are well protected, and these BNPL players will not play with their sentiments. Now the BNPL players needs to pivot their existing business, to ensure business continuity.

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