Slice moves from line of credit to term loans after RBI action

Fintech startup Slice switched from providing lines of credit through its app to conventional term loans, after the Reserve Bank of India said last month that non-bank fintechs could not provide lines of credit . Slice was among the most exposed to the RBI change, and it now appears to have fundamentally changed the way it disburses credit to its customers to reflect this new restriction.

Slice notified users of the change in an email sent on Tuesday. Coach reviewed a copy of the email.

A spokesperson for Slice declined to comment.

The company calls the new credit disbursement mechanism “Purchase Power” and did not mention RBI’s actions leading to the change in its email. “Each time you make a transaction with your Slice card, a new approval decision will be made instantly to assess the best amount you can borrow for the purchase. The decision will be determined primarily based on the credibility of the merchant, the risk, fraud checks and your past payments and reimbursement models,” Slice told customers.

“Purchasing power is an estimate of how much you may be eligible to borrow from Slice and may change at the time of purchase, while a credit limit is a maximum amount a lender has ever decided you can borrow,” the company explained in its email. .

This essentially means that flexible, borrower-friendly repayment terms can be replaced with service identical to a regular credit card, minus the fixed credit limit. Instead of offering a line of credit, Slice will now analyze the creditworthiness of borrowers on every transaction, although this may be a line to avoid RBI rules again. Ultimately, the effort is to ensure that the end customer does not suffer or suffer any significant change in experience on their end, despite the significant change in the nature and princess of credit disbursement now.

The Reserve Bank of India had clarified in June that providers of prepaid instruments (wallets) such as Slice are not allowed to offer lines of credit. Slice and other fintechs like it had based their entire USP around such a product, and now must turn to more traditional lending methods.

“Any failure to comply in this regard may result in criminal prosecution under the provisions contained in the Payments and Settlement Systems Act 2007,” the circular warned.

Correction and update (July 21): An earlier version of this article stated that the RBI had clarified that non-bank wallets were not allowed to offer a line of credit. This restriction applies to all wallets. Additionally, Slice’s refusal to comment on this development has been added to this story.

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