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RBI set to release more guidelines for BNPL companies using pre-paid instruments

India’s central bank RBI to bring the buy-now-pay-later BNPL segment under regulations through new guidelines after curbs in June

What's up? After imposing a series of curbs on non-bank buy now pay later (BNPL) companies in June, the Reserve Bank of India (RBI) is set to release more guidelines for the BNPL domain, the Financial Express reported.  So far, a majority of the BNPL sector has been using pre-paid instruments (PPIs) to extend short-term, interest-free loans to customers for online purchases. The RBI’s new guidelines for BNPL players are expected to consider industry trends of the BNPL segment and accordingly, frame new regulations. The Financial Express also cited protected sources that the circular for these rules might be out as early as within a week. Why does it matter? At Q1 2022, the BNPL segment of India’s fintech industry was riding high and was estimated to touch the $43 billion mark, at a CAGR of 80%, by 2025. However, the RBI’s recent regulations have significantly hurt the sector, even making companies consider pulling out of the lending business altogether. With the Reserve Bank's upcoming guidelines set to reshape the regulations of the BNPL sector, one can conclude that the vertical will be facing a tough time as companies adjust themselves to the new rules. Why does the RBI want to implement these reforms? The terms and conditions laid by BNPL companies "misalign with the set customer protection regulations of India", found a study by Dvara Research, resulting in customers incurring different costs before and after defaulting loan repayments while paying interest rates as high as 36%. As such the…

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