Several Indian fintechs have been impacted by the Reserve Bank of India’s order this week. The order has asked the State bank of Mauritius (SBM) India to stop all the transactions under the liberalized remittance Scheme. The charge would be imposed until further changes.
Big names in the fintech firs have directly impacted the RBI’s decision. It includes the neo banking fintechs like Niyo and Zolve. The company has been started by TaxiforSure co-founder Raghunandan G. Other platforms that were impacted by the decision were IndMoney, Vested Finance, and other multiple industry leaders.
Niyo has brought a halt to its international transaction for the forex cards which are in collaboration with SBM India. On the other hand, Vested and IndMoney had to modify the user transaction flows to help to load U.S. accounts for brokerage.
People who are aware of the changes have stated that seven or eight fintechs are affected by the new regulations by the RBI along with many other offline tasks that have partnered with SBM.
SBM India has been popular in the Indian economy for its first fintech growth model and has increased partnerships with 35 fintech companies in India.
The bank collaborates with different platforms like BookMyForex, Instarem, and HopRemit that help with remittances in India.
The LRS scheme was introduced in 2004 by the banking regulators. According to the policy, Indians can freely remit an amount of 250000 USD every financial year for different permissible transactions associated with the SBM bank.
Fintechs partnering with SBM is in deep trouble:
Sudarshan Motwani, the founder, and the chief executive of BookMyForex have stated that based on their understanding, fintechs that had a good relationship based on account opening arrangement with the SBM might be more affected by the decision. It will depend on the degrees of integration.
Furthermore, three fintech companies have stated that the LRS ban will affect the international remittance for debit card customers of SBM India. Account holders with SBM can still go for domestic payments or withdraw their deposits.
The most deeply impacted fintech company is Niyo. The company offers its forex card Niyo Global Card which has an exclusive partnership with the SBM Bank.
The RBI’s orders have resulted in the suspension of transactions made by the Forex Global Card.
One of the fintech executives has stated that the ban on the LRS transactions on SBM India does not account for third-order impacts. The decision will mainly impact travelers abroad who would not be able to access their funds through the cards or can’t complete a transaction. The decision will create anxiety for them. In addition, some of the cards are a part of spending by the corporate sector which will leave the users in deep trouble.
A spokesperson has confirmed the ban on international transactions on the Niyo Card.
The Niyo Gloal program card allows users to have an international debit card with a savings account in collaboration with SBM India. Presently, international transactions have been brought to a halt to comply with the RBI’s orders. However, the users can continue to use the card for their domestic spending and transfer funds through various payment methods such as UPI, ATM withdrawal, etc.
Niyo has worked closely with SBM India and is anticipating the resuming of international transactions through their debit card.
The change has been demonstrated in the user experience and the forex charges for platforms such as IndMoney and Vested. They allow users to invest in US stocks.
IndMoney had to remain offline for 48 hours to change the methods of the transaction after RBI’s new regulations Previously, foreign remittance transaction was a single-time experience for the users where transactions can be made through the SBM banks.
Ashish Kashyap, the founder of IndMoney has stated that they are currently processing the concerns of the RBI with the SBM bank transactions.
IndMoney being a fintech partner has to go through stringent measures and tough processes to ensure that its operations and systems are working in compliance with the existing guidelines provided by the bank.
Different fintech companies have been affected by SBM’s LRS ban and are seeking alternate methods of banking and transactions to ensure the continuity of their businesses.
edited and proofread by nikita sharma
