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ARTICLE · 20 SEPTEMBER 2022

Changing Face Of The PPI Linked Buy Now Pay Later

Luthra and Luthra Law Offices India
Luthra and Luthra Law Offices India
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Luthra and Luthra Law Offices India

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On June 20, 2022, the Reserve bank of India ("RBI") issued a letter to all the authorized non-bank prepaid payment instruments ("PPIs"), stating that PPIs must not be loaded through credit lines, as the PPI Master Directions, 2021, do not permit loading of PPIs from credit lines.

IndiaTechnology
Avisha Gupta
Avisha Gupta
Ananya Mishra
Ananya Mishra
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On June 20, 2022, the Reserve bank of India ("RBI") issued a letter to all the authorized non-bank prepaid payment instruments ("PPIs"), stating that PPIs must not be loaded through credit lines, as the PPI Master Directions, 2021, do not permit loading of PPIs from credit lines. RBI has further clarified that such practice, if followed, should be stopped immediately, and any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007. This letter raised questions on PPI linked Buy Now Pay Later ("BNPL") business models offering credit lines to the end users.

The Indian fintech sector has witnessed several BNPL models, and in the recent times, there had been a boom of PPI linked BNPL products. Such products typically are facilitated byof arrangements between fintechs involved in digital lending, and banks/NBFCs. In this, the NBFC/bank would provide a credit line to the customer through a PPI,

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