The block was implemented from the midnight of March 31 following which customers have not been able to transact with these cards, these people said.
“On March 21, we got an email from SBM India stating that the RBI compliance team had asked them to update all KYC details for corporate customers,” a fintech executive who runs a credit card business in a tie-up with SBM Bank India said. “It took us by surprise because it was all very sudden.” All major fintechs with credit card relationships with SBM India, such as M2P, Karbon, EnKash, KODO, were affected as customers suddenly found their cards blocked. The bank and its card fintech partners have told customers to update KYC to avoid facing blockages. More than 90% of SBM India’s 10 lakh credit cards are backed by fintechs.
Another person said thousands of customers have been locked out of their credit cards since April 1.
“Thousands of clients and startups have not been able to use their credit cards and there is no substitute as large banks do not serve startups with credit cards,” a second person said. “The bank has been under the RBI scanner because it was reportedly crossing the line with these partnerships.”
Some card-holders said they did not get enough notice. Suraj Dhirwani, a healthcare consultant, complained on Twitter that only a three-hour window was given to update KYC.
“No prior mails. No communication. Email at 21:05 saying the corporate cards will be ‘on hold’ from midnight,” Dhirwani said. “At SBM Bank India, meeting regulatory requirements is a top priority. This includes a sustained focus on conducting periodic checks and monitoring at the client level, both during onboarding and throughout their lifecycle,” said a bank spokesperson. “The Bank has taken decisions for re-KYC on some corporate credit card accounts in line with our commitment to maintaining the most compliant environment.” Another fintech executive told ET that they had asked all their corporate credit card customers to update their KYC.
“We have asked all corporate credit card customers to update their KYC because the bank has categorically told us that customers who don’t do their KYC their cards will be blocked,” the official cited above said.
The RBI did not respond to ET’s queries until publication of this report. SBM Bank India has emerged as a powerhouse for Indian fintechs, assisting more than 40 such companies with partnerships on payments, credit and investment.
However, the bank has been under regulatory scanner after several governance issues cropped up in an RBI audit, people in the know said. The central bank has also tightened screws on lenders outsourcing arrangements with fintechs and other third parties. In January this year the Reserve Bank suddenly ordered SBM Bank India to stop processing any international remittances under the liberalised remittance scheme (LRS) after discovering “material supervisory concerns”.
The central bank had concerns that certain overseas money transfer practices of SBM’s fintech partners did not follow the appropriate procedures.
Prior to that in June last year the bank and its fintech partners had to stop onboarding new clients after the RBI sent a communication to non-bank prepaid instruments directing them not to load cards with credit lines.
