The note was sent to all partner fintech companies earlier this week, and comes after the Reserve Bank of India (RBI) released its digital lending guidelines.
“They (SBM) have sent out a note on new user additions. They are quite apprehensive following the RBI guidelines last week but there are meetings lined up with the bank later this week. For now, the note says about pausing onboarding of new users,” one of the people briefed on the matter said.
Sources said Slice, the credit card challenger unicorn, has also temporarily stopped issuing new prepaid cards but continues to onboard users through its Unified Payments Interface (UPI), no-cost EMI, and cash transfer offerings. A spokesperson for Slice declined to comment while emails sent to SBM Bank didn’t elicit an immediate response.
In its first leg of guidelines for the digital lending industry, the RBI clarified that all loan disbursals and repayments should be executed between the bank account of the borrower and the regulated entity.
Industry sources said there is no clarity yet as to what happens to existing users of prepaid card users such as Slice but clarity may emerge after the proposed meeting later this week.
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ET reported on June 23 that SBM was one of the only banks to have continued its support for the card-fintech industry after the RBI sent a communication to industry stakeholders, asking them to stop prepaid payment instruments (PPIs) from being loaded through credit lines.
ET
reported on June 30 that
had told its co-branding card fintech partners that it would stop support services starting June 30. On June 23, ET
reported that digital lending startup Kissht was ending its partnership with RBL Bank for its co-branded product.
ET also reported that card-fintech players including Uni and LazyPay (through its LazyCard) had stopped onboarding new users for their prepaid credit card product after RBI circular on June 20.
In order to ensure business continuity, fearing disruptions, several fintech firms were exploring alternative credit models with Indian lenders including opening a bank account — plus an add-on debit card — with lenders to disburse loans, issuing co-branded credit cards instead of PPIs, and disbursing credit as cash directly into customers’ existing bank accounts.
ET
reported on July 19 that prepaid cards issued by fintech firms such as Slice, Uni and LazyPay have slid below the 100,000 mark after the Reserve Bank of India recently barred the industry them from loading credit lines onto wallets and other such prepaid payment instruments (PPIs).
According to sources, the fintech industry collectively issued close to 500,000-700,000 new prepaid cards in May.
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