"I think the RBI is in a civil war. One faction talks about innovation and inclusion. Another faction works hard to undermine this. This circular makes no sense to me at all."
"They seem to have decided to close fintech companies in India. One blow coming after the other."
These were just some of the messages being exchanged between founders of fintechs in India on WhatsApp groups on the evening of June 20th, minutes after a letter by the Reserve Bank of India (RBI) threatened to endanger their very existence. In a missive that went out to many startups in the evening, the RBI said that loading credit lines into prepaid payment instruments (PPIs) such as wallets and prepaid cards is not permitted.
What seemed like a routine Monday swiftly turned into an existential crisis for many Indian fintechs. RBI reminded these entities that a prepaid instrument can only be loaded using cash, a bank account debit, or a proper debit or credit card, and other PPIs and ‘other payment instruments issued by regulated entities’.