RBI Wallet Rules Could Shut Down Remittance Business

Key Takeaways

• Cash loading limit drops from Rs 50,000 to Rs 10,000 under draft rules
• Minimum KYC wallets would be banned from person-to-person transfers
• Industry body plans to submit counter-proposals within days

What the Draft Guidelines Propose

The Reserve Bank of India released draft guidelines on April 22 that would fundamentally change how mobile wallets operate in India. The proposals include a Rs 25,000 monthly limit on person-to-person fund transfers via wallets. Cash loading limits would drop from Rs 50,000 to Rs 10,000. A new overall monthly balance cap of Rs 2 lakh would apply across wallet accounts.

The most disruptive change targets small prepaid payment instruments (PPIs). These wallets with minimum know-your-customer (KYC) verification would only be allowed for purchasing goods and services. Person-to-person transactions would be banned entirely for these accounts.

"This move effectively means that minimum KYC wallets cannot be used for remittance transactions even for a short period of time till they are converted into full KYC ones," a senior industry executive told the Economic Times. "This will disrupt the wallet-based domestic remittance industry."

Industry Pushback Begins

The digital payments industry is not taking these proposals quietly. Companies are coordinating a formal response through the Payments Council of India, the industry body representing payment players.

"Industry participants are gathering their inputs, and the plan is to share definitive comments and suggestions with the central bank through the industry body within the next two days," the chief executive of a major digital payments company told ET. The executive requested anonymity.

The industry's main ask is straightforward: push the implementation deadline by six to twelve months and conduct consultations with industry representatives before finalizing the rules.

Who Gets Hurt

Large wallet companies like Mobikwik face the most direct threat. The severe restrictions would shrink their addressable market and eliminate revenue streams built around prepaid instruments.

"It could disrupt lines of business that payment companies have built on prepaid instruments; it will also drastically shrink the size of the business as limits have been tightened on multiple offerings," said the chief executive of a Mumbai-based digital payments company.

Paytm faces a different challenge. The company is still trying to recover its mobile wallet license after RBI's action against Paytm Payments Bank, its associate entity. Stricter rules would make that license less valuable even if Paytm wins it back.

The Bigger Picture

These draft guidelines arrive at an awkward moment. The payments industry is already struggling with revenue generation. Wallet interoperability through UPI, which could open new revenue streams, is still waiting for final regulatory clearance on interchange arrangements.

The domestic remittance market, which depends heavily on low-KYC wallets, would take the hardest hit. Workers sending money home to family often use these simplified wallet accounts precisely because they don't require extensive documentation. Blocking these accounts from P2P transfers eliminates that use case entirely.

What Happens Next

The Payments Council of India will submit its formal response within days. Industry executives hope to convince RBI to hold stakeholder consultations before finalizing the rules. The six to twelve month delay request would give companies time to restructure their business models if the rules proceed.

RBI has not indicated whether it will accept feedback or fast-track implementation. The draft guidelines remain open for comment, but the regulatory body has not announced a formal consultation process.

Frequently Asked Questions

What are the new RBI wallet limits?

The draft proposes a Rs 25,000 monthly cap on P2P transfers, Rs 10,000 cash loading limit (down from Rs 50,000), and Rs 2 lakh overall monthly balance limit.

Can I still use my mobile wallet for shopping?

Yes. Even minimum KYC wallets would still be allowed for purchasing goods and services. The restrictions target person-to-person transfers.

When do these RBI wallet rules take effect?

The guidelines are still in draft form. The industry is asking for a 6-12 month implementation delay if the rules are finalized.

Which wallet companies are affected?

All mobile wallet operators including Mobikwik would be affected. Paytm, currently trying to recover its wallet license, would face restrictions on any future wallet operations.

Source: Tech-Economic Times / ET