SBM blocks fintech-partnered credit cards on short notice

As on February 28, SBM’s total credit card outstanding stood at 10.33 lakh, RBI data showed. Photo: iStock
As on February 28, SBM’s total credit card outstanding stood at 10.33 lakh, RBI data showed. Photo: iStock

Summary

  • Several credit card holders complained of receiving the email from the bank just few days prior and some receiving it merely hours before the cards were blocked for use from midnight of 31 March.

SBM Bank India, the wholly-owned subsidiary of foreign lender State Bank of Mauritius (SBM), has blocked the corporate credit cards it offered in partnership with several fintech players in India following a Reserve Bank of India (RBI) diktat to update their 'know your customer' (KYC) details, multiple people privy to the development told VCCircle.

Several credit card holders complained of receiving the email from the bank just few days prior and some receiving it merely hours before the cards were blocked for use from midnight of 31 March.

“On March 31 morning 8.07 am I got the email from SBM Bank stating that ‘We would like to bring to your kind attention that your Kodo SBM Corporate Card will be on hold, temporarily, with effect from the midnight of 31st March 2023, for want of reKYC’. None of their customer service numbers or emails responded after that. It is shocking that they would suddenly just block our cards without prior notice," said a fintech executive who runs a debt lending platform.

Another executive said this is the primary card being used by thousands of startups and fintech clients who may face difficulties in doing transactions: “There is no substitute as large banks do not serve startups with credit cards."

The impact is across all major fintechs with credit card offerings in partnership with SBM India, such as M2P, RazorPay, KODO, Karbon, EnKash whose customers’ cards were blocked in a sudden move. Most of these fintechs counts venture capital and other private investors.

A majority of the 10 lakh credit cards issued by SBM Bank have been blocked. As on February 28, SBM’s total credit card outstanding stood at 10.33 lakh, RBI data showed.

Some cardholders also complained that none of their customer care services responded till over the weekend and had suffered failure of transactions which were linked to the cards.

After receiving no response from the bank, Suraj Dhirwani, a doctor and healthcare consultant, posted on Twitter, "No prior mails. No communication. Email at 21:05 saying the corporate cards will be 'on hold' from midnight."

Speaking to VCCircle, Dhirwani said, “Three hours is no time to give a deadline. I bought the card through RazorPay just six months ago, I don’t understand why the re-KYC was required in just a short time. This seems unethical and I strongly suspect SBM does not have systems in place."

RazorPay declined to comment. An email sent to RBI did not elicit a response immediately.

For now, the fintech partners and SBM have informed their customers to do the re-KYC to avoid facing blockages.

Two of the fintech players impacted by the move spoke to VCCircle to say they too have been left clueless with SBM’s sudden decision.

"The fact that they did it in such a short time shows there could be something the regulator would have wanted on an urgent basis. Till we get a communication from the bank on the reasons, we have asked all our corporate credit card customers to update their KYC. The bank has asked us to inform customers on updating KYC, that’s it," said one of the fintech players.

“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," according to a SBM bank spokesperson, who claimed that prior notice was given to the customers.

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, the spokesperson further said.

SBM Bank (India) Ltd is a step-down subsidiary of SBM Holdings Ltd, a listed entity in the Mauritius Stock exchange, promoted by the government of Mauritius.

In January this year, SBM Bank came under regulatory scrutiny as RBI banned the lender from processing any foreign exchange remittances abroad under the so-called Liberalised Remittance Scheme (LRS) till further orders.

Last year, it had also instructed fintech partners to stop onboarding new customers after an RBI order related to pre-paid instruments.

SBM had become a go-to bank for fintechs and had tied up with more than 44 firms.

According to one of the industry executives who didn’t wish to be named, “SBM has been in the crosshairs of RBI for some time now and banned from all LRS transactions as they were sending US dollars out for crypto trading. A larger problem seems to be at play and instead of fixing their processes they just shut all the cards under regulatory pressure."

 

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