SBM Bank India, the wholly-owned subsidiary of State Bank of Mauritius (SBM), has blocked all commercial credit cards it was offering in association with fintech companies following a Reserve Bank of India (RBI) direction to update their ‘Know Your Customer’ (KYC) details.
According to Indian media, the block was implemented from the midnight of March 31 following which customers have not been able to transact with these cards.
“It is shocking that they would suddenly just block our cards without prior notice,” said a fintech executive who runs a debt lending platform.
The impact is across all major fintechs with credit card offerings in partnership with SBM India, such as M2P, RazorPay, KODO, Karbon, EnKash whose customers’ cards were blocked in a sudden move. Most of these fintechs counts venture capital and other private investors.
A majority of the 1 million credit cards issued by SBM Bank have been blocked. As on February 28, SBM’s total credit card outstanding stood at 1.3 million, RBI data showed.
Some cardholders also complained that none of their customer care services responded till over the weekend and had suffered failure of transactions which were linked to the cards.
Fintech
“The fact that they did it in such a short time shows there could be something the regulator would have wanted on an urgent basis. Till we get a communication from the bank on the reasons, we have asked all our corporate credit card customers to update their KYC. The bank has asked us to inform customers on updating KYC, that’s it,” said one of the fintech players.
In January this year, SBM Bank came under regulatory scrutiny as RBI banned the lender from processing any foreign exchange remittances abroad under the so-called Liberalised Remittance Scheme (LRS) till further orders.
Last year, it had also instructed fintech partners to stop onboarding new customers after an RBI order related to pre-paid instruments.
SBM had become a go-to bank for fintechs and had tied up with more than 44 firms.
According to one of the industry executives who didn’t wish to be named, “SBM has been in the crosshairs of RBI for some time now and banned from all LRS transactions as they were sending US dollars out for crypto trading. A larger problem seems to be at play and instead of fixing their processes they just shut all the cards under regulatory pressure.”
Sources: Economic Times, Mint
