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The Reserve Bank of India (RBI) on Tuesday (July 12) slapped a penalty of INR 1.67 Cr on Ola Financial Services for non-compliance with directions for prepaid payment instruments (PPIs) and Know Your Customer (KYC) norms. 

“The RBI has imposed monetary penalty of INR 1,67,80,000/- on Ola Financial Services Private Limited for non-compliance with certain provisions of the Master Directions on PPIs dated August 27, 2021 (as updated from time to time) and the Master Direction – Know Your Customer (KYC) Direction, 2016 dated February 25, 2016 (as updated from time to time),” the central bank said in a release.

The action was taken under Section 30 of the Payment and Settlement Systems Act, 2007.

The RBI said that it had previously issued a show cause notice to Ola Financial Services after the company was found to be non-compliant with the KYC norms. 

“After considering the entity’s response, RBI concluded that the aforesaid charge of non-compliance with RBI directions was substantiated and warranted imposition of monetary penalty,” the release added. 

The central bank also said that its action was based on deficiencies in regulatory compliance and was not intended to pronounce upon the validity of any transaction or agreement entered into by the entity with its customers.

The development comes at a time when Ola has shut its used car division and quick commerce business, and renewed its focus on financial services business.

The ride-hailing arm of the company is reportedly also looking to lay off around 400-500 employees. 

Ola has been looking to consolidate its play in the fintech space by ramping up its offerings in the buy now pay later (BNPL) segment. It has also partnered with more than 300 brands to promote its products. Ola has been using its popular ride-hailing app to integrate its fintech offerings such as Ola Wallet, among others. 

Earlier in March, Ola Financial Services acquired neobanking platform Avail Finance, which incidentally is led by CEO Bhavish Aggarwal’s brother. 

Prior to that in December, the company invested INR 786.14 Cr in Ola Financial Services to better compete with other major fintech players. 

The move comes at a time when the RBI is looking at tightening regulations for fintech players. Last month, the central bank said that non-bank issuers cannot load their PPIs with a credit line. The move has raised concerns among fintech players as it raises questions on the business models of many of them.

While the notification is still not in public domain, many fintech players, including OlaMoney, suspended some of their services last month to comply with the new guidelines.