Companies have started to lobby against India’s new digital lending rules after regulators halted card services and put Amazon loan offers at risk.
Earlier this month, the Reserve Bank of India (RBI) issued a rule that borrowers must deal directly with banks, bad news for prepaid cards lendersand other services that serve as lending intermediaries, Reuters reported on Friday August 26.
“All loan disbursements and repayments shall be executed only between the bank accounts of [the] the borrower and the regulated entity without any bridging/pool accounts from loan service providers or any third parties,” the central bank said in its announcement.
Read more: Reserve Bank of India tightens digital lending rules
Additionally, the Reserve Bank said fees paid to applications will now be covered by the lender, with no charge to borrowers.
The new rules have affected prepaid card offers from companies such as United and Slicewhich have teamed up with banks and allow users to split purchases into interest-free refunds, a feature not offered with typical credit cards, Reuters reported.
The RBI said the new regulations should be implemented immediately, but noted that “detailed instructions will be issued separately,” according to the report.
However, Uni suspended card services this week due to RBI rules, while Slice halted issuance of new cards, the report said.
Meanwhile, there are also fears the rules could hamper the efforts of big companies like Amazon and Walmart. Flipkart to expand their buy now, pay later (BNPL) programs, according to the report, which cites unnamed sources.
Currently, Amazon and Flipkart facilitate loans for their buyers, with the bank paying the online merchant and the borrower eventually repaying the loan to the lender. The new rules could affect this system if online merchants cannot receive direct payments, the report says.
“It is likely that the transparency of customer use of credit will be severely affected,” said the Internet and Mobile Association of India, an industry group representing Amazon and Flipkart, in a draft internal lobbying document created with the PwC consulting group, according to the report. .
The group wants to urge the RBI to make an exception for direct payments to merchants under the new rules, according to the report.