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India’s digital lending requirements are causing upheaval, and businesses are preparing to respond. 

Aditya Kalra and Nupur Anand

MUMBAI, India (Reuters) – According to industry insiders and a document obtained by Reuters, India’s tighter digital lending laws have interrupted card services of foreign-backed fin-tech businesses and jeopardized Amazon’s loan offers, causing corporations to plan a lobbying backlash.

The Reserve Bank of India (RBI) said this month that a loan borrower must interact directly with a bank, a blow to prepaid card companies and shopping websites that operate as middlemen and promptly handle deferred loan payments.

In 2021-22, India’s digital lending sector would permit $2.2 billion in digital loans, with startups drawing international investors and giving established banks a run for their money in the credit business.

The new laws have already impacted Tiger Global-backed Slice and Accel-backed startup Uni’s prepaid card services, which have collaborated with banks and allowed customers to divide purchases into interest-free simple installments, a feature not accessible with traditional credit cards.

Uni’s popularity stemmed from its ability to solve “time-sensitive money crunches”: its cards were swiped for $67 million on average monthly, far more than the credit card use of certain smaller commercial and public banks in India.

The RBI stated that the new guidelines will go into effect immediately, but that “specific instructions will be published separately.”

Nonetheless, Uni terminated its card services this week owing to RBI regulations, affecting hundreds of thousands of consumers, while Slice has halted new card issues.

According to three industry sources, there is growing concern that the regulations will limit the ability of larger rivals like Inc. (NASDAQ: AMZN) and Walmart (NYSE: WMTFlipkart) to expand their successful buy-now-pay-later programs, which have reached millions of consumers.

This is because Amazon and Flipkart currently offer loans to their customers. The bank pays the online merchant, while the borrower pays the lender afterward. According to insiders, the new RBI guidelines may have an impact on this method if online merchants are unable to receive payments directly.
In a draft internal lobbying paper created in partnership with consultancy firm PwC, “the Internet and Mobile Association of India,” a prominent industry organization representing Amazon and Flipkart, wrote in a draft internal lobbying paper.

The organization intends to lobby the RBI to make direct merchant payments an exemption to the new restrictions.

Flipkart has been optimistic about the buy-now-pay-later business, claiming in May that it had more than quadrupled its user base to more than 6 million in seven months.
According to sources, two additional groups representing payment companies and digital lenders want to persuade the RBI to modify several clauses.

Slice said in a statement that it was committed to adhering to Indian legislation, which it described as recognizing rapidly growing business. It made no mention of the commercial problems.

The RBI, IAMAI, and PwC, as well as none of the other firms, did not reply to Reuters inquiries.


Among other things, the RBI has stated that fin-tech businesses should recoup the costs of enabling a digital loan from their banking partners rather than the borrowers. In addition, organizations must employ nodal officers and improve user data security.

According to Rahul Sasi, a cybersecurity expert who served on an RBI panel that helped draft the new regulations, while some disruption is unavoidable, the ultimate goal is to protect consumers.

“The aim has always been to let the companies function; it was never about destroying the fin-techs,” he explained.

Nonetheless, fin-tech businesses are concerned, fearing that further rules are on the way. According to Swapnil Bhaskar, head of the strategy at Indian digital banking solutions firm “Niyo,” the laws might lead to industry consolidation and halt the sector’s fast growth.
Some people have been dissatisfied with the inconvenience.

Athul Bhadran, a 28-year-old engineer, said he enjoyed using his Uni prepaid card to manage his budget by dividing larger expenditures, like the 19,000 rupees ($238) he spent on a washing machine, into manageable chunks. He can’t anymore.

“I always had peace of mind if I wanted to spend a large sum,” he explained.

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