The Reserve Bank of India has imposed a monetary penalty of Rs 21 lakh on fintech company PhonePe for non-compliance with rules governing prepaid payment instruments.
The regulator said its inspection of PhonePe’s operations between October 2023 and December 2024 revealed that the company’s escrow account balance fell short of the value of outstanding wallets and payments due to merchants on certain days. PhonePe also failed to immediately report these shortfalls to the central bank, the RBI order said.
“The end of the day balance in the escrow account of the company was less than the value of outstanding PPls and payments due to merchants on certain days and the company did not report shortfall in the said escrow account to RBI immediately,” RBI said.
The penalty was levied under provisions of the Payment and Settlement Systems Act, 2007. RBI clarified that the action was based on deficiencies in regulatory compliance and does not affect the validity of transactions or agreements between PhonePe and its customers. The central bank added that further actions could be taken if needed.
The RBI, after considering PhonePe’s replies and additional submissions during the hearing, upheld the charge of non-compliance and imposed the fine.
Meanwhile, PhonePe has roped in bankers, Kotak Mahindra Capital, JPMorgan Chase, Citigroup and Morgan Stanley to launch its initial public offering, according to reports.
The Walmart group firm had last raised Rs 7,021 crore (around $850 million) at a pre-money valuation of Rs 12 billion (about Rs 1 lakh crore) from investors like General Atlantic, Walmart, Ribbit Capital, TVS Capital Funds, and Tiger Global in the financial year 2023.
PhonePe investors, led by Walmart, paid almost Rs 8,000 crore (close to $1 billion) in taxes to the Indian government to affect PhonePe’s domicile shift to India from Singapore in 2022.
