Digital wallet MobiKwik announced that it will be offering a annual ‘profit’ of 6% on user’s accounts whose balance is above Rs 5,000. Technically this profit is the interest earned on funds stored in bank escrow accounts. A close reading of the Reserve Bank of India’s guidelines for wallets says that a ‘core portion’ of the funds in escrow accounts can be taken out to a separate account on which interest is payable.
However, these funds need to be in business for one year and duly audited . From the RBI guidelines:
The entity can enter into an agreement with the bank where escrow account is maintained, to transfer “core portion” of the amount, in the escrow account to a separate account on which interest is payable, subject to the following:
1. The bank shall satisfy itself that the amount deposited represents the “core portion” after due verification of necessary documents.
2. The amount shall be linked to the escrow account, i.e. the amounts held in the interest bearing account shall be available to the bank, to meet payment requirements of the entity, in case of any shortfall in the escrow account.
3. This facility is permissible to persons who have been in business for at least ONE YEAR and whose accounts have been duly audited for the full accounting year.
4. NO LOAN is permissible against such deposits. Banks shall not issue any deposit receipts or mark any lien on the amount held in such form of deposits.
5. Core portion as calculated above will remain linked to the escrow account. The escrow balance and core portion maintained should be clearly disclosed in the Auditors certificates submitted to Reserve Bank of India on quarterly and annual basis.
“We want to share our benefits with users to reward their loyalty and trust, thus are able to share this profit. This is not interest,” a spokesperson for MobiKwik clarified. MobiKwik will credit the amount accrued to user’s account on a monthly basis. This ‘profit’ will be processed as monthly cashback to incentivise to users. On a balance of Rs 5,000, this works out to be Rs 300 which would be credited through this.
Although, MobiKwik is a wallet company, it stated that it is poised to become a ‘digital bank.’ Earlier this week, the company expanded its services by offering instant micro loans of Rs 500-2,500 to wallet users running short on balance while making a purchase, according to this PTI report. MobiKwik has partnered with consumer-lending marketplace, CashCare for the service.
Note that MobiKwik did not get a payments bank licence from the Reserve Bank of India (RBI) in August which would have allowed it to offer interest rates on deposits. It’s also worth noting that, in an interview last year, Mrinal Sinha, chief operating officer at MobiKwik, said that the company would look at offering interest on wallets as part of their payments bank strategy.
Funding: Last month, MobiKwik raised $50 million in a series C round of funding led by Japan’s GMO Payment Gateway and Taiwan’s Mediatek. Existing investors such as Sequoia Capital and Treeline Asia also participated in the round. In April last year, MobiKwik raised ~$25 million in Series B funding led by Tree Line Asia, existing investor Sequoia Capital along with Cisco Investments and American Express for investing in technology data analytics, brand building and growing its user and merchant base.
Explore nearby: In March, MobiKwik launched an ‘Explore Nearby’ feature on its app, which let users discover neighbourhood stores, restaurants, cafes etc., that accept payments from the company. At the time, the company mentioned that it had over 10,000 partner stores including merchants like Big Bazaar, Domino’s, Barista, Archies etc.
Update: Post was updated with the RBI’s guidelines.