The ban from the Reserve Bank of India (RBI) on outward remittance services will likely have a detrimental effect on SBM Bank India and other fintech partners that offer such services. Firms that offer these services typically rely on growing volumes to justify their continued existence, but with this new directive from the RBI, many investors may be less willing to put money into ventures that could potentially get shut down by the central bank at any time.
The Reserve Bank of India has ordered SBM Bank India to stop all transactions under the Liberalised Remittance Scheme due to concerns over how funds are being transferred overseas. The RBI fears that the scheme is being used to evade taxes and launder money, and has asked the bank to suspend all transactions until further orders. This move may impact the ability of Indians living abroad to send money back home, and could have a negative impact on the Indian economy as a whole.
One supervisory concern that prompted the central bank to issue the advisory was an increased number of suspicious accounts being opened at the bank. The RBI is urging customers who are potentially affected by this issue to contact their financial institution immediately.
SBM Bank is one of the most fintech friendly startups in India. The bank has tie ups with dozens of young firms, including startup companies, to provide its customers with a variety of services, such as the ability to purchase foreign stocks. This partnership opens up new opportunities for these startups and signals SBM’s commitment to support innovation and create a budding Fintech ecosystem in India.
If the deal goes through, SBM Bank India would become one of the largest fintech firms in the country. The bank is already one of the largest lenders to digital startups and has been working on developing its own fintech platform.
