Tiger Global-backed fintech Slice has sought the Reserve Bank of India's (RBI) approval to issue credit cards through its registered non-banking finance company (NBFC) Quadrillion Finance, according to sources aware of the development.
The move comes in the aftermath of RBI's clarification to fintechs that loading of credit lines onto prepaid payment instruments (PPIs) like wallets and prepaid cards is prohibited, has threatened the business model of players like Slice, Uni, PayU's LazyPay, and BharatPe's PostPe, among others.
Slice's application is based on RBI's Master Direction for credit, debit and co-branded cards, which were updated on April 21 this year. The document said that NBFCs cannot undertake credit card business without prior approval of the regulator. The upside being NBFCs can now issue credit cards if they are successful in securing the regulator’s nod.
RBI had also said that any entity that wants to issue credit cards shall require a Certificate of Registration and a minimum net-owned fund of Rs 100 crore.
However, according to multiple industry sources, securing the regulator's approval is likely to be an uphill task for Slice.
"While RBI has specified a minimum net owned fund requirement for NBFCs that wish to issue credit cards, that alone is not going to be the only thing they will consider before giving approvals. The understanding is that RBI is going to be very selective in allowing NBFCs to issue credit cards," said a fintech industry executive.
Slice did not respond to queries sent by Moneycontrol on the development.
According to sources, Slice was keen to apply for the nod ever since RBI updated the Master Directions and was planning to make a representation at the right time. The plan was, however, accelerated due to the PPI clarification.
Another fintech founder said on condition of anonymity, “While it may be difficult for Slice to get RBI’s approval, in a way it is good that they have put it on record that they wish to issue credit cards.”
Until now NBFCs were not allowed to issue credit cards and only state-backed SBI Cards and BoB Cards issued credit cards.
Large NBFCs, mainly Bajaj Finance, have long been waiting for RBI's green signal to begin issuing credit cards. Besides Bajaj Finance, other NBFCs including Aditya Birla Capital, M&M Financial Services, Sundaram Finance, L&T Finance Holdings, IDFC Ltd, and Tata Investment Corp are likely to be ahead in the queue if RBI decides to actually extend any approvals.
After RBI's clarification on lending through PPIs, impacted companies have been looking at alternatives for their business models, while industry bodies are engaged in discussions with the regulator for further clarity on these models.
Uni is said to have stopped onboarding new card customers post RBI's diktat, while PayU's LazyPay is working towards shifting from prepaid cards to pure credit cards.
"Slice has not yet stopped onboarding new customers and continues to issue cards in partnership with State Bank of Mauritius India. The company's stance is that they are doing full KYC for all customers. They will wait for further clarity from RBI before making any changes," said another source, who did not wish to be named.
Besides responses to these representations, the industry is also waiting for the comprehensive digital lending guidelines that the RBI is expected to release this month. Any further decisions to change business models are likely to be taken once these norms are out.
Slice turned into a unicorn, or a private company with a valuation of $1 billion or above, in November 2021 after it raised $220 million led by Tiger Global and Insight Partners. This was followed by a $50-million fundraise in June this year from existing investor Tiger Global. Founded by IIT, Kharagpur alumnus Rajan Bajaj in 2016, the company currently has 12 million registered users.The company recently changed its strategy from offering its core interest-free ‘Pay-in-3’ product to all customers, to select customers with good credit scores and/or repayment history. The company updated its terms and conditions to mention that customers will be charged 36 percent interest per annum if repayments are not done in one instalment.