Mumbai: Mobikwik, a mobile wallet company, has announced that it will offer a 6% “annual profit" to its customers who maintain a monthly balance of at least ₹ 5,000 in their mobile wallets.
This is effectively like an interest payment, although the company is at pains to not call it that for fear of attracting the regulator’s ire.
To be sure, the Reserve Bank of India is kept in the loop by all mobile wallet companies regarding their new products, and given that it has not objected to the “annual profit" sharing, it is likely the regulator doesn’t have a problem with Mobikwik.
RBI has not yet responded to an email seeking comment.
With wallet companies such as Mobikwik, the money that customers have in their wallets is actually stored in an escrow account with a commercial bank. This money cannot be accessed by anyone except the customer when paying for something. So the wallet company does not have direct access to the funds.
This means that Mobikwik isn’t paying its customers out of earnings from their money. Given the way the new economy works, the money probably comes out of a venture capitalist’s coffers. What Gross Merchandise Value is to the marketplaces, the number and size of wallets is to mobile wallet companies.
Still, at 6%, Mobikwik will be paying a higher ‘interest’ than the 4% savings account interest that most banks offer in India.
Kotak Mahindra Bank offers 6% on its savings bank account, if the annual balance is ₹ 1 lakh or above. For customers with balance below that level, the bank offers 5% interest. Yes Bank offers 6% on all savings bank deposits with an annual balance of up to ₹ 1 crore.
Smaller private sector banks had started offering a higher rate of interest on savings bank accounts after the Reserve Bank of India (RBI) deregulated rates in 2011. This was a strategy for these banks to build on retail savings deposits, which would boost their respective current account savings account (CASA) ratio. As such, these deposits became a route for these banks to earn fee income from customers through cross selling other products offered by the banks.
However, RBI is cautious about any entity that accepts deposits. In the past, the regulator has even objected to some non-banking finance companies (NBFCs) accepting deposits from their customers.
In February 2012, the RBI cautioned the public against gold loan lender Mannapuram Finance Ltd, which was accepting deposits from the public without proper regulatory approvals. The regulator said that people who continued to hold deposits with the NBFC after its caution letter would be doing so at their own risk.
Mobikwik also entered the micro credit business last month, by offering small loans worth ₹ 500-2,500 to customers who are in urgent need for cash during a transaction and are falling short. For this it has tied up with a consumer lending marketplace, CashCare.
With products that are very similar to a savings account deposit and its micro-credit offering, Mobikwik is quickly becoming like a bank. Mobikwik had applied for a payments bank licence to the RBI, but was denied one.
“The e-wallet company has cleverly worded it as 6% annual profit which sounds like a 6% interest on balance in savings bank account. However, this term can be misleading for the consumers and looks like a grey area. They should be more cautious," said Vivek Belgavi, partner, financial services–fintech and technology consulting leader, PwC India.
In an April event, RBI governor, Raghuram Rajan said that the banking regulator was approaching financial sector innovations with an open mind and would design regulations accordingly.
“As a regulator it is the easiest to say no to a proposal when you do not fully understand the problem. The problem with saying no is that then we will never fully work out the problem at hand and it keeps the system from developing. Too many limitations up front and you prevent growth and development," Rajan said then.