RBI says non-banks can’t load credit lines on prepaid instruments; investors spooked as DeFi bubble pops

Also in this letter:
■ DeFi bubble bursts, spooking VCs and retail investors
■ Cashback drives surge in WhatsApp Pay UPI transactions
■ TCS may roll out chip-based e-passports this year

Non-banks can’t load credit lines on prepaid payment instruments: RBI

The Reserve Bank of India on Monday disallowed non-bank wallets and pre-paid cards from loading their credit lines onto these platforms. The regulator, in a one-page circular addressed to non-bank pre-paid payment instruments (PPIs), directed them to stop the practice immediately.

“The PPI-MD does not permit loading of PPIs from credit lines,” the RBI said. “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.”

PPI-MD refers to the ‘master direction’ on these instruments, which contains instructions on the rules governing them.

Why? The RBI’s clarification is being seen as an effort to clamp down on card-based fintechs and firms operating as neobanks that have tied up with banks to offer credit lines.

Response: Slice, a credit card challenger startup, said it was evaluating the RBI’s communication. “We are committed to be on the right side of regulation in letter and spirit and are working with our partner bank on this,” said Rajan Bajaj, founder and CEO of Slice.

As per existing RBI guidelines, pre-paid instruments are allowed to be loaded using cash, bank accounts, and credit and debit cards. The guidelines do not allow the use of credit lines to top up these instruments.

DeFi bubble bursts, spooking VCs and retail investors in India

Shashank Bhardwaj from Delhi is writing off his entire investment in US-based crypto lending platform Celsius Network.

The 28-year-old Bhardwaj had pumped in 30-40% of his entire crypto portfolio into the platform to earn interest on “crypto that was lying around in his wallet.”

Celsius drops: Celsius, which had almost $12 billion under management as of May, lent out the deposits of customers – who were treated as unsecured creditors – to other users and invested in decentralised finance (DeFi) protocols.

Bhardwaj, like other retail investors, was attracted to the platform because of the returns it promised.

However, Celsius told customers on June 12 that it was pausing all withdrawals, swaps and transfers between accounts because of extreme market volatility.

It now faces probes by regulators in five US states.

No recourse: Bhardwaj’s experience reflects a broader level of anxiety among domestic retail investors, especially those who invested in crypto for the first amid last year’s unprecedented bull run.

Many who had put their money on Celsius have no option but to make peace with their losses.

Founders and venture capitalists are also adjusting to the new reality. The collapse of the Terra blockchain’s native token Luna, which reportedly erased $40 billion from the crypto market, has had a cascading effect.

This time’s different: Unlike in previous cycles, institutions are falling apart. Decade-old crypto hedge fund and an active backer of Web3 startups, Three Arrows Capital, is weighing a bailout, according to a report in the Wall Street Journal.

Solend, a lending platform on Solana, is also evaluating steps to prevent a major liquidation event.

Also Read:How DeFi could one day liberate finance

Cashback drives surge in WhatsApp Pay UPI transactions

WhatsApp Pay’s move to kickstart its cashback campaign has boosted its digital payments ambitions on the Unified Payments Interface (UPI) network after a sluggish start.

Big jump: Since it started giving cashbacks to users over the past couple of weeks, WhatsApp Pay has seen daily transaction numbers surge from a few hundred thousand a day to two to three million a day, sources briefed on the matter told us.

While WhatsApp Pay has been active on UPI for some time, it started aggressively giving cashbacks after it was allowed to scale the service to 100 million users, they said.

It recently ran a single-day promotion offering up to Rs 105 cashback in three instalments for sending Re 1 or more to different contacts.

Yes, but: While the spike in transactions is noteworthy, it will be critical to see if it holds with smaller cashback offers or none at all, the sources added.

In context: UPI leaders like Google Pay and PhonePe have previously relied on incentives to attract users. They had a 47% and 34% market share, respectively, as of April. WhatsApp Pay had a minuscule 0.04% share.

We reported on June 6 that NPCI may extend the January 2023 deadline for its contentious mandate requiring payment apps to hold no more than 30% market share.

Focus on merchants: Sources said WhatsApp Pay is also focusing on merchant payments as that could unlock more transactions from existing and new users. It has started onboarding various merchants for UPI-based payments.

Long way to go: That said, its total user base is yet to cross over the previous limit of 40 million, according to sources aware of the matter, let alone the 100 million it can theoretically bring on board.

TWEET OF THE DAY

TCS may roll out chip-based e-passports this year

Tata Consultancy Services (TCS) could roll out chip-based e-passports by the end of the year, a senior executive told us.

TCS is also setting up a new command and control centre with the Ministry of External Affairs (MEA), and a new data centre to support the project’s backend requirements, said Tej Bhatla, head of its public sector business unit.

This is part of the second phase of the passport project the company recently bagged.

The ongoing chip shortage worldwide has been baked into the timeline for the rollout of the e-passport, Bhatia said.

While the ministry renewed its 10-year PSK deal worth over Rs 6,000 crore with TCS in January, the government said in the budget that it would implement chip-based e-passports.

TCS, India’s largest software services firm by revenue, manages similar solutions for India Post and IRCTC.

BrightChamp eyes M&As worth $100 million for growth

Edtech startup BrightChamps is planning to close mergers and acquisitions worth $100 million through stock and cash deals in the ongoing fiscal year (FY23), cofounder and chief executive Ravi Bhushan told us.

The acquisitions will likely be across India, the United States, the UK, the Middle East and Southeast Asia, he said.

He declined to share details of potential deals but said the market opportunity is “much bigger” than anticipated.

BrightChamps acquired Education 10X in February in a stock-and-cash deal. The financial terms were not disclosed.

Founded in 2020 by Bhushan, an IIT-Varanasi graduate, BrightChamps offers online courses on programming, artificial intelligence, design thinking and financial literacy to kids aged 6-16 years.

It operates in more than 30 countries, including the United States, Canada, UAE, Saudi Arabia, Indonesia, Malaysia, Thailand, and Nigeria.

Done Deal: Bengaluru- and Gurugram-based fintech startup FinBox has raised around $15 million (Rs 15 crores) in its latest funding round. A91 Partners led the round, with participation from Aditya Birla Ventures and Flipkart Ventures. Existing investors Arali Ventures also took part. FinBox will use the funds to scale its offerings and expand across Southeast Asia.

Dailyhunt launches in Middle East, North Africa

VerSe Innovation, which runs apps like news aggregator Dailyhunt and TikTok clone Josh, is expanding globally with the launch of Dailyhunt in the Middle East.

Media executive Shekhar Iyer has been appointed director and general manager of VerSe Innovation, Middle East and North Africa (MENA).

Iyer has worked with multiple Middle East-based media companies in the past, including Khaleej Times, Abu Dhabi Media, and Persian Gulf.

VerSe has rolled out Dailyhunt in the UAE, Saudi Arabia, Bahrain, Oman, Qatar, and Kuwait. It is headquartered in Dubai. Dailyhunt has launched its business with over 5,000 content partners catering to the UAE market.

The local-language content platform will soon partner with news publishers, including MENA Newswire, Al Khaleej, The Brew, Chalk Media, Brandknew, KKompany, Mudgal Kreations, Buzzing, and Gulf Today, among others.

Other Top Stories By Our Reporters

Meesho rolls out one-year leave: Meesho has rolled out a policy under which employees who are critically ill can take up to a year off with full pay and benefits. The company will allow employees to also take up to a year off – with up to 25% pay for three months – to help care for family members with a prolonged illness.

Gaming firms eye studios to boost growth: Gaming firms have zeroed-in on game studios as the next big opportunity as they look to diversify their portfolio of games. Earlier this month, JetSynthesys announced a new venture called Jetapult, which will invest up to $100 million in acquiring and operating game studios over the next nine months.

Corporate leaders support Agnipath scheme: Corporate leaders have come out in support of the government’s Agnipath scheme. Anand Mahindra tweeted on Monday morning, “Saddened by the violence around the #Agneepath program. When the scheme was mooted last year, I stated & I repeat, the discipline & skills Agniveers gain will make them eminently employable. The Mahindra Group welcomes the opportunity to recruit such trained, capable young people.”

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