The Reserve Bank of India (RBI) has disallowed non-bank pre-paid wallets and pre-paid cards from loading credit lines into these platforms.

In a notification, the regulator has clarified that its master direction on non-bank pre-paid payment instruments (PPIs) does not permit loading of PPIs from credit lines. The RBI issued the clarification keeping in mind the interest of consumer safety. 

“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 RBI said.

So, what are PPIs? They are payment instruments that facilitate the buying of goods and services, including the transfer of funds, financial services, and remittances, against the value stored within or on the instrument. They are in the form of payment wallets, smart cards, mobile wallets, magnetic chips, vouchers, etc. As per the regulations, banks and NBFCs can issue PPIs.

How does a credit line differ from a fixed loan? A credit line is a preset borrowing limit which allows an individual or a business access to credit at any time, as per need. A customer can source it till the limit offered is not crossed. A lump-sum loan, on the other hand, is a fixed amount which is borrowed.

There are many fintechs who offer a credit product along with their main offerings. These include companies like Paytm, Amazon Pay and LazyPay who offer postpaid wallets with small credit lines. Others like Slice, Uni, Fi, OneCard, etc. offer credit cards in partnership with banks and NBFCs.