RBI Slaps Penalty on PhonePe for Payment Compliance Lapse

The Reserve Bank of India (RBI) has levied a penalty of Rs 21 lakh on PhonePe Limited for non-compliance with Prepaid Payment Instruments (PPI) norms. The decision follows a detailed statutory inspection conducted by the central bank, assessing the company's operations between October 2023 and December 2024.

The RBI's supervisory findings highlighted PhonePe's failure to meet specific regulatory standards. This led to a notice requiring PhonePe to explain why they should not face penalties for these lapses. Despite the company's responses and further submissions, RBI concluded that infractions occurred, justifying the financial penalty.

A critical finding was that PhonePe had an end-of-day escrow account balance that fell below outstanding PPI values and merchant payments on specific days, failing to report this shortfall promptly to RBI. However, the RBI clarified the penalty reflects compliance deficiencies rather than the legitimacy of transactions or agreements with customers.