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RBI bars credit lines for prepaid wallet topup


MUMBAI: The RBI on Monday said that issuers of prepaid instruments (wallets) cannot allow them to be loaded using credit lines.
The difference between credit and a credit line is that credit is deposited in the borrower’s account whose interest meter starts ticking the moment the funds land. In a credit line, the bank makes available funds to the customer, but it turns into a loan only when the borrower draws the money.
This comes in the wake of certain wallet providers including an option that allows a user without balance to pay later by providing a line of credit. In a circular to all non-bank prepaid payment instrument (PPI) issuers, the RBI said that its guidelines permit PPIs to be loaded by either cash, debit to a bank account, credit & debit cards and other payment instruments inrupees.
Bankers said that the RBI has been adopting a light touch regulation on small-ticket credit including ‘buy now, pay later’. However, it has been insisting that providers make it clear to the borrower who the lender is and the cost of credit. Earlier this year, the central bank had sought information on first-loss default guarantee (FLDG) exposure of banks. FLDG refers to the credit guarantee provided to a regulated lender by a non-regulated entity.

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