Companies have begun to lobby against India’s new digital lending rules after the regulations interrupted card services and put Amazon loan offerings in peril.
Earlier this month, the Reserve Bank of India (RBI) issued a rule that said borrowers must deal directly with banks, bad news for prepaid card loan providers, and other services that serve as loan intermediaries, Reuters reported Friday (Aug. 26).
“All loan disbursals and repayments are required to be executed only between the bank accounts of [the] borrower and the regulated entity without any passthrough/pool account of the lending service providers or any third party,” the central bank said in its announcement.
In addition, the Reserve Bank said fees paid to apps will now be covered by the lender, with no burden on borrowers.
The new rules have hit prepaid card offerings from companies such as Uni and Slice, which have teamed with banks and let users split purchases into interest-free repayments, a feature not offered with typical credit cards, Reuters reported.
The RBI has said the new regulations were to be implemented right away but noted that “detailed instructions will be issued separately,” according to the report.
However, Uni suspended its card services this week because of the RBI rules, while Slice has halted the issuance of new cards, the report stated.
Meanwhile, there are also concerns that the rules will hamper efforts by larger companies like Amazon and Walmart-owned Flipkart to expand their buy now, pay later (BNPL) programs, according to the report, which cited unnamed sources.
Right now, Amazon and Flipkart facilitate loans for their shoppers, with the bank paying the online merchant, and the borrower eventually making loan payments to the lender. The new rules could affect this system if online merchants can’t receive direct payments, the report stated.
“It is likely that seamlessness of availing credit by the customer will be severely impacted,” the Internet and Mobile Association of India, an industry group representing Amazon and Flipkart, said in a draft internal lobbying document created with consulting group PwC, per the report.
The group wants to urge the RBI to make an exception for direct merchant payments under the new rules, according to the report.
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