RBI gives partial relaxation to SBM Bank India

The regulator last week ordered the bank to stop processing international remittances under the liberalised remittance scheme after discovering “material supervisory concerns”, affecting the operations of partnering fintech companies including Niyo and IndMoney.

RBI gives partial relaxation to SBM Bank India

Tuesday January 31, 2023,

3 min Read

Reserve Bank of India (RBI) partially relaxed the restrictions on SBM Bank (India), up to March 15, by allowing ATM and point-of-sale transactions (POS) on internationally active debit cards issued by the bank.

Last week, the regulator ordered the State Bank of Mauritius (SBM)’s Indian subsidiary to stop processing any international remittances under the liberalised remittance scheme (LRS) after discovering “material supervisory concerns”.

The LRS refers to the annual remittances that a resident person is permitted to send. It allows Indians overseas to remit up to $250,000 every year for investment, education, healthcare, tourism, and maintenance of relatives.

“The bank has since initiated corrective actions and made submission for relaxation of the restrictions. Based on the submission and also to provide relief to the affected customers of the bank, it has been decided to partially relax the restrictions by allowing ATM/POS transactions under LRS through KYC compliant internationally active debit cards issued by the bank,” the Central bank said in a statement. 

This relaxation is up to March 15, or until further orders, whichever is earlier. 

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The ban had impacted several fintech companies including neobanks Niyo and Zolve, and investment platforms IndMoney and Vested Finance, besides offline players that offered services in partnerships with the bank. 

Niyo had temporarily paused international transactions for its forex card, called Niyo Global Card (issued in association with SBM India).

The relaxation allows these partners to resume forex transactions via SBM-powered debit cards. Investing abroad, however, remains restricted. 

Investment platform Vested Finance had temporarily stopped processing fresh deposits for its SBM Bank-powered instant funding product, ‘Vested Direct’, due to the RBI order, while IndMoney had to change user transaction flows to help load US brokerage accounts. 

Users were asked to use their existing bank accounts to deposit US dollars into their brokerage accounts.

“Adding new money to US stocks a/c via SBM bank India will be temporarily paused. Please note that your money in your US stocks a/c is absolutely safe. You can continue to buy, sell & withdraw to your bank a/c," IndMoney had said.

"SIP have been temporarily paused as the bank, SBM Bank India will not be able to process new outward remittances because of a recent RBI order. We will notify you as soon as alternate channels for the same are activated,” it added. 

After tightening the noose around digital lending platforms, RBI is taking a closer look at other bank-fintech partnerships.

The CapTable had earlier reported that Federal Bank had received additional queries from the regulator on its partnership with Pune-headquartered OneCard.

OneCard runs a co-branded credit card programme powered by the private sector lender. While OneCard acquires and manages customers, Federal Bank underwrites the loans and owns the card rails—a pathway facilitating payments between the cardholder and the associated financial entity.

Edited by Kanishk Singh