Major Indian banks have started warning customers against using their services to trade in cryptocurrencies. In an email to customers, banks, including HDFC Bank and State Bank of India, have said that users who deal in virtual currencies may face account suspension citing a 2018 circular from the Reserve Bank of India. Notably, the circular was struck down by the Supreme Court in March 2020.
Confirming the development, a banker told Moneycontrol that banks have sent these emails to some of their customers to "alert them in the context of lack of clarity on bitcoin regulations from the RBI".
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The banker further said that RBI's directive is important for banks, hence the old circular is being cited in the emails sent to customers.
"The Supreme Court circular was against the RBI order. Till the time, the RBI doesn't clarify, these rules need to be abided by the banks," the banker said on the condition of anonymity.
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In an email sent to a 21-year old cryptocurrency investor, HDFC Bank said, "We have observed that your account reflects probable virtual currency transactions which aren’t permitted as per RBI guidelines.”
The private lender told the customer to visit the nearest HDFC Bank branch and "clarify the nature of these transactions" failing which the bank will be "compelled to restrict transactions" in the account, as per a BloombergQuint report.
Similarly, SBI reminded users to be "mindful" of risks associated with cryptocurrencies and virtual currencies. "Please note, usage of credit card for transactions on virtual currency platforms may lead to suspension/cancellation of your SBI credit card," the public sector lender said in mails.
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The Supreme Court had in March last year struck down the RBI directive saying the central bank failed to provide evidence to prove the potential harm that could be suffered by the regulated entities due to the operation of the cryptocurrency players.
As the regulation and legality of cryptocurrencies remains in grey, banks have lately started distancing themselves from cryptocurrency exchanges like Wazir X, Coin DCX, ZebPay.
Crypto investors who hold bank accounts with major private and public sector banks, including ICICI and HDFC, have not been able to deposit or withdraw money from their crypto accounts multiple times in the last few weeks.
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