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    RBI restricts TalkCharge from issuing wallets, mentions it didn’t order cashback refunds

    The Reserve Bank of India (RBI) has ordered TalkCharge Technologies to stop issuing prepaid payment instruments (wallets) to its customers by May 17, 2024. RBI said that as per the Payments and Settlement Systems (PSS) Act of 2007, anyone who wants to commence/operate a payments system requires authorization from the RBI. TalkCharge Technologies had not been authorized to provide Prepaid Payment Instruments (PPIs) by the regulation.

    PPIs are instruments that facilitate the purchase of goods and services, apart from financial services and remittance facilities. These can be cards, wallets, and any such form/instrument that can be used to access the PPI and to use the amount present in it.

    The order restricting TalkCharge from providing PPI wallets was first issued on April 2, 2024. In it, RBI instructed TalkCharge to refund the balance held in TalkCharge wallets to the customers either to the original source (to the mode of payment used to load the wallet) or to the customers’ bank accounts. Then, on April 25, RBI said that it had come to its notice that, “the entity [TalkCharge] has issued a legal notice to its customers demanding the return of Cashback, failing which the matter will be reported to the RBI. Thus, the entity has created an impression in the minds of its customers that demand for repayment of cashback amount is being made as per the directions of the RBI.” The regulator clarified that it only directed TalkCharge to refund the prepaid amount lying in the wallets, to the customers.

    Can TalkCharge ask for cashback refunds?

    Cashbacks are generally a rewards program that returns a percentage of each purchase to the buyer. TalkCharge had a dedicated section of products and services to buy from, which would give people a chance to get cashback. According to the terms and conditions specified on the company’s website, it “retains the right to withdraw rewards/cashback from a user’s account” which says that it did indeed inform users that it could do so.

    What did RBI say in its original order?

    In its April 2 direction to TalkCharge, RBI described two specific kinds of PPIs —

    • Closed System PPIs: These are PPIs issued by an entity for facilitating the purchase of goods and services from that entity only and do not allow cash withdrawals. These PPIs notably do not require authorization by RBI.
    • Small PPIs: These are only used for the purchase of goods and services, and can only be used at a group of clearly identified merchant locations that have a contract with the PPI issuer. Money cannot be withdrawn from such PPIs.

    The regulator noted that funds present in TalkCharge wallets could be used for third-party services such as utility bill payments, recharges, etc. As such, these wallets didn’t fall under the scope of closed-system PPIs. Therefore, RBI found TalkCharge to be violative of the PSS Act and gave it 15 days to submit compliance with its directions to shut down the wallets and refund the amount present in them.

    Also read:

    The post RBI restricts TalkCharge from issuing wallets, mentions it didn’t order cashback refunds appeared first on MediaNama.

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