Synopsis
The penalty followed the Walmart-owned digital payments firm’s end-of-day balance in its escrow account on certain days falling short of the value of outstanding prepaid payment instruments and payments due to merchants. The company failed to report this shortfall to the central bank immediately. RBI has been tightening its scrutiny of payment companies to ensure compliance with escrow account maintenance and reporting norms.
The Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 21 lakh on Walmart-owned digital payments firm PhonePe for non-compliance with certain regulatory provisions governing prepaid payment instruments (PPIs).
The penalty, announced through an order dated September 10, follows a statutory inspection of PhonePe’s operations for the period between October 2023 and December 2024. The penalty was imposed under provisions of the Payment and Settlement Systems Act, 2007, according to a press release on Friday.
RBI said the company’s end-of-day balance in its escrow account on certain days fell short of the value of outstanding PPIs and payments due to merchants. The company also failed to report the shortfall to the central bank immediately, the regulator noted.
Following supervisory findings of non-compliance and subsequent correspondence, RBI issued a notice to PhonePe, asking why a penalty should not be imposed for the lapses.
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“After considering the company’s reply to the notice, additional submissions made by it, and oral submissions made during the personal hearing, RBI found, inter alia, that the following charge against the company was sustained, warranting imposition of monetary penalty,” according to a statement.
However, the central bank noted that the action was based on deficiencies in regulatory compliance and did not affect the validity of transactions or agreements PhonePe had entered into with its customers.
RBI has been tightening its scrutiny of payment companies to ensure compliance with escrow account maintenance and reporting norms.
The action comes at a time when PhonePe is preparing for an initial public offering (IPO) later this year. The company has tapped Kotak Mahindra Capital, JPMorgan Chase, Citigroup, and Morgan Stanley to manage the issue.
PhonePe, which transitioned from a private to a public entity in April, narrowed its net loss by 29% in FY24 to Rs 1,996 crore from Rs 2,795 crore in FY23. The improvement was driven by a 74% jump in operating revenue to Rs 5,064 crore from Rs 2,914 crore in the previous fiscal.
Source: www.economictimes.indiatimes.com