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RBI rejects MobiKwik`s payment aggregator license application on crypto association grounds

RBI

TL;DR Breakdown

  • The Reserve Bank of India (RBI) turns down MobiKwik`s application to run Zaakpay.
  • MobiKwik halts taking in more clients while existing clients have 180 days to fold.
  • RBI`s reason for rejection is tied to MobiKwik`s support for cryptocurrency.

The Reserve Bank of India (RBI) has denied MobiKwik’s payment aggregator license owing to its tie with cryptocurrency platforms. According to sources, the Gurugram-based firm, with authorization for an IPO worth Rs 1,900 million, will be unable to bring new merchants on board. Additionally, any existing businesses that utilize Zaakpay as a payment gateway will have 180 days to abandon the service.

RBI turns down MobiKwik`s application to operate Zaakpay

According to the reports, one of the primary reasons for the Reserve Bank of India’s refusal of MobiKwik’s payment aggregator license was its support for cryptocurrency exchanges via Zaakpay. The RBI’s red light means that MobiKwik will be unable to add new clients who utilize Zaakpay as a payment gateway.

At the start of April, the company abruptly stopped offering services to all crypto firms and refused to disclose why. The RBI governor, Shaktikanta Das, previously said that India’s stance on Bitcoin is clear. The RBI considers private cryptocurrencies to be a significant risk to the country’s macroeconomic and financial stability.

Bipin Preet Singh and Upasana Taku, a husband-and-wife team, launched MobiKwik in 2009. In 2012, MobiKwik introduced Zaakpay as its payment gateway, which allows websites and applications to accept payments from their users using numerous payment options such as debit and credit cards, mobile wallets, UPI, and net banking.

Following the RBI’s refusal, several Indian crypto exchanges have disabled the use of UPI technologies on their platforms. The National Payments Corporation of India (NPCI), which runs retail payment and settlement systems, has issued an official statement indicating that it is unaware of any crypto exchange that uses UPI.

The RBI’s order came to halt trade on dozens of Indian cryptocurrency exchanges two days after the NPCI clarification. MobiKwik was one of the most popular e-wallet suppliers on Bitcoin exchanges. These exchanges rely on peer-to-peer transfers and arrangements with a few prominent institutions to conduct crypto trading due to the abrupt suspension of UPI services.

Indian payment gateways under scrutiny

According to experts, the Reserve Bank of India has investigated online payment services such as Cashfree and MobiKwik. From now on, these fintech businesses may face an RBI decision to reject their payment aggregator license applications.

Regulation entities accused Cashfree of obstructing the RBI’s investigations, with representatives supposedly being questioned by the central bank on merchant partnerships for payout services, know-your-customer (KYC) standards, net worth requirements, and onboarding betting apps as clients.

The regulator is clearly not okay with payment aggregators having dealings with cryptocurrency companies, or with gaming apps which have in the past been accused of being a conduit to launder money.

a person directly aware of the development.

According to RBI rules, payment aggregators must have a net worth of Rs 15 crore on the date of their applications or by March-end 2021 and Rs 25 crore by the end of FY23.

The Directorate of Enforcement (ED) in India investigated several Indian payment gateways for allegedly allowing consumers to send money to Chinese gambling applications last year. Cashfree was one of the companies under scrutiny.

Over the past several months, the bank held talks with payment gateway and other fintech firms that had applied for a payment aggregator license. The payment aggregator framework was first publicly announced in March 2020, restricting businesses to those authorized by the RBI to provide and acquire payment services for trades.

At least 185 fintech firms, including Cred, Razorpay, and PhonePe, have applied for payment aggregator licenses. The RBI has not yet granted any licenses. However, the entity has notified businesses with rejected applications, according to sources. 

When an application gets rejected, merchants have three months to cease utilizing a gateway’s service. According to sources, the RBI wants to extend this period to six months. Meanwhile, the finance ministry and the central bank are developing a central bank digital currency (CBDC), which is a digital equivalent of the rupee.

Florence Muchai

Florence Muchai

Florence is a crypto enthusiast and writer who loves to travel. As a digital nomad, she explores the transformative power of blockchain technology. Her writing reflects the limitless possibilities for humanity to connect and grow.

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