A proposed tightening of mobile wallet regulations by the Reserve Bank of India (RBI) is forcing fintech companies to revisit business plans built around prepaid payment instruments (PPIs), a segment that has continued to grow even as UPI dominates digital payments.
Industry executives said the draft framework issued on April 22 could restrict several wallet-led offerings and slow growth in a category that processed 695 million transactions worth ₹22,448 crore in March. The sector is now preparing to seek regulatory consultations and modifications to some of the proposals before the rules are finalised.
“The proposals materially reduce the flexibility that wallets currently offer consumers. If implemented without modifications, several high-volume use cases may become commercially unviable,” said the founder of a fintech firm, requesting anonymity.
Among the key proposals, the RBI has capped person-to-person wallet transfers at ₹25,000 per month, reduced the cash loading limit to ₹10,000 from ₹50,000, and imposed an overall monthly balance ceiling of ₹2 lakh.
The regulator has also proposed restricting minimum-KYC wallets to payments for goods and services, effectively barring their use for person-to-person transfers.
“Many customers use entry-level wallets before completing full KYC requirements. Removing remittance functionality at this stage could impact adoption and disrupt existing domestic transfer models built around wallets,” said a senior payments industry executive.
Industry participants are expected to seek a phased implementation timeline and broader consultations with stakeholders before the rules are finalised. Some executives suggested that the rollout should be deferred by six to twelve months to allow companies adequate time to adapt.
The proposals could particularly affect wallet-focused companies such as Mobikwik, while Paytm continues efforts to restore its wallet business after regulatory action against Paytm Payments Bank.
Executives also expressed concerns over the future of wallet interoperability through UPI. While the framework for wallet-based UPI payments has been introduced, pending clarity around interchange arrangements has limited adoption.
Despite UPI’s dominance, wallet transactions have continued to grow. RBI data shows wallet transactions rose to 695 million in March, amounting to ₹22,448 crore, compared with 506 million transactions worth ₹16,077 crore a year earlier. Industry estimates suggest around 110 million users actively use mobile wallets.
Some industry executives believe the regulator’s move may be aimed at addressing practices such as credit-linked wallet products, co-branded card-like offerings and the proliferation of multiple wallets by the same user.
“The direction of the draft suggests the regulator wants a clearer distinction between banking products and wallet-based services, while ensuring payment firms operate within a more narrowly defined regulatory perimeter,” said another executive.
The draft guidelines also prohibit cross-border transactions through PPIs unless operators hold separate authorisations for such services, adding another compliance requirement for wallet providers.