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Reserve Bank of India (RBI) partially relaxed the restrictions on SBM Bank (India), up to March 15, by allowing ATM and point-of-sale transactions (POS) on internationally active debit cards issued by the bank.

Last week, the regulator ordered the State Bank of Mauritius (SBM)’s Indian subsidiary to stop processing any international remittances under the liberalised remittance scheme (LRS) after discovering “material supervisory concerns”.

The LRS refers to the annual remittances that a resident person is permitted to send. It allows Indian to remit overseas up to $250,000 every year for investment, education, healthcare, tourism, and maintenance of relatives.

“The bank has since initiated corrective actions and made submission for relaxation of the restrictions. Based on the submission and also to provide relief to the affected customers of the bank, it has been decided to partially relax the restrictions by allowing ATM/POS transactions under LRS through KYC compliant internationally active debit cards issued by the bank,” the central bank said in a statement. 

This relaxation is up to March 15, 2023 or until further orders, whichever is earlier. 

The ban had impacted several fintech companies including neobanks Niyo and Zolve, and investment platforms like IndMoney and Vested Finance, besides offline players that offered services in partnerships with the bank. Neobank Niyo had temporarily paused international transactions for its forex card called Niyo Global Card (in association with SBM India).

The relaxation would now allow these partners to resume forex transactions via (SBM powered) debit cards, however, investing abroad would still remain restricted. 

Meanwhile, investment platform Vested Finance had temporarily stopped processing fresh deposits for its instant funding product ‘Vested Direct’, powered by SBM Bank, due to the order while IndMoney had to change user transaction flows to help load US brokerage accounts. 

Users were asked to use their existing bank accounts to deposit USD into their brokerage accounts.

“Adding new money to US stocks a/c via SBM bank India will be temporarily paused. Please note that your money in your US stocks a/c is absolutely safe. You can continue to buy, sell & withdraw to your bank a/c,” IndMoney had said.

“SIP have been temporarily paused as the bank, SBM Bank India will not be able to process new outward remittances because of a recent RBI order. We will notify you as soon as alternate channels for the same are activated,” it added. 

After tightening the noose around digital lending platforms, the RBI is taking a closer look at other bank-fintech partnerships. The CapTable had earlier reported that Federal Bank has also received additional queries from the regulator regarding the nitty gritty of its partnership with Pune-headquartered OneCard. OneCard runs a co-branded credit card programme powered by the private sector lender. While OneCard acquires and manages the customer, Federal Bank underwrites the loan and owns the card rails—a pathway facilitating payments between the cardholder and the associated financial entity.