State Bank of India’s (SBI) mobile wallet, SBI Buddy, should not allow cash withdrawals. SBI MD Rajnish Kumar has told multiple media outlets that the bank is allowing cash withdrawals from the wallet via ATM from June (onwards) with a charge of Rs 25 plus Rs 3.5 service tax; additionally, cash withdrawals from Business Correspondents from the mobile wallet will be charged 2.5% of the transaction plus service tax.

But here’s the thing: SBI Buddy is a semi-closed prepaid wallet – which it also clearly mentions in its FAQs – and the Reserve Bank of India (RBI) guidelines for semi-closed wallets do not allow cash withdrawals from semi-closed prepaid wallets.

Note that SBI had to issue a clarification recently after a widespread outcry when it posted a circular which said that ATM withdrawals will be charged Rs 25. It later said that only cash withdrawals from the Buddy wallet will be charged. We don’t quite understand how cash can be withdrawn from SBI Buddy anway. At the time of filing this report, SBI MD Rajnish Kumar was unavailable in his office. MediaNama has sent an email seeking comment about the same and will update once we hear from them.

Need an open wallet to withdraw cash

Note that there has been an instance where a wallet player has allowed cash withdrawals, but that was done via an open prepaid wallet, not a semi-closed one: open wallets allow cash withdrawals, and ItzCash had tied up with RBL Bank to launch a ‘Rupay Platinum Prepaid Card’ which would allow users to withdraw cash at any ATM that accepts RuPay.

SBI Buddy users and transactions 

SBI Buddy reported more than 5.27 million registrations at the end of the quarter ended December 2016 (Q3 FY17). SBI saw a huge number of registrations for its wallet in the month of December when the demonetization of Rs 500 and Rs 1000 notes was under way. The bank saw more than 1.9 million registrations in  December 2016.  The total number of transactions from April 2016 to December 2016 stood at Rs 12.012 million. The number of transactions was 3.86 million in December.

Nikhil adds: I’m wondering if someone at SBI forgot to read the semi-closed prepaid wallet guidelines. Either that, or they’re trying to convert SBI Buddy into an open wallet. As of now, semi-closed prepaid wallet guidelines do allow the deposit of money into a bank account, as long as the wallet account holder has done a Know-Your-Customer (KYC) verification, and linked the wallet to the bank account. One way that SBI can allow withdrawals from this wallet is if it transfers money first to KYC’ed accounts, and then allows withdrawals from ATMs. It’s convoluted, but it’s just a switching mechanism with digital money, since there is no physical transfer of money between the wallet and the bank account.

The questions that is situation raises for me: What’s the difference between a semi-closed prepaid wallet run by a bank and an open wallet? What’s the difference between a bank account and a wallet? Why does SBI even have a semi-closed wallet? Why do banks even have wallets? You get the drift…