The Reserve Bank of India (RBI) has imposed a penalty of ₹21 lakh on PhonePe Limited for non-compliance with its regulatory directions on Prepaid Payment Instruments (PPIs). The penalty was announced on September 12, 2025, and is a result of an inspection conducted by the RBI from October 2023 to December 2024. The inspection revealed that PhonePe had failed to maintain sufficient funds in its escrow account to cover all outstanding balances and merchant dues, and had also failed to report these shortfalls immediately to the RBI.
PPIs are digital wallets or cards that store monetary value and are used to purchase goods and services. The RBI requires PPI issuers to maintain an escrow account with sufficient funds to cover all outstanding balances and merchant dues. Any shortfall or delay in reporting such discrepancies is treated as a serious compliance violation. In PhonePe’s case, the inspection found that on certain days, the end-of-day balance in its escrow account was less than the value of outstanding PPIs and payments due to merchants, which is a clear violation of the RBI’s PPI guidelines.
The RBI has emphasized that the penalty is based solely on deficiencies in regulatory compliance and does not impact the validity of any transactions or agreements between PhonePe and its customers. The penalty was imposed under the provisions of Section 30(1) read with Section 26(6) of the Payment and Settlement Systems Act, 2007. The RBI has also stated that this action does not prevent it from taking further steps in the future.
The penalty imposed on PhonePe is a significant one, and it highlights the importance of regulatory compliance in the payment services industry. The RBI has made it clear that it will take strict action against any company that fails to comply with its regulatory directions, and this penalty is a testament to that. PhonePe will need to take steps to ensure that it is in compliance with the RBI’s PPI guidelines going forward, and it will be interesting to see how the company responds to this penalty.
Overall, the penalty imposed on PhonePe is a significant development in the payment services industry, and it highlights the importance of regulatory compliance. The RBI’s actions demonstrate its commitment to ensuring that companies operating in the industry are in compliance with its regulatory directions, and it will be interesting to see how the industry responds to this penalty.