Indian banks have expressed their concerns over the crypto UPI restrictions imposed by the National Payments Corporation of India or NPCI, a specialized division of the Reserve Bank of India that falls under the purview of the Ministry of Finance. The banks have requested an official rating from the NPCI.
A written circular from the NPCI soon
Following “verbal instructions” from the NPCI, many banks have discontinued the UPI or Unified Payments Interface to settle transactions for crypto traders. UPI payments do not require internet banking passwords or other details to complete transactions and can be made using smartphones.
The banks have asked the NPCI for an official statement, but it looks like it won’t happen anytime soon, according to an NPCI official who spoke to a local media. He added that there was “no intention of any circular”.
On the other hand, bank officials believe that NPCI’s reluctance stems from fear of backlash from banks and crypto communities as well as legal complications. A bank official added:
“If there is an official circular to ban UPI for cryptos or VDAs, regardless of nomenclature, the crypto industry would likely challenge it legally – as they did when RBI imposed a ban in April 2018.”
Coinbase removes UPI
After a high-profile launch of its platform in India and the addition of UPI as a payment method, the largest exchange in the United States ceased service in the country just days after its launch. The exchange said it was working with NPCI to “ensure it is aligned with local expectations and industry standards.”
Commenting on the restrictions imposed on UPI, a bank official said:
“We did not fully understand the decision of the NPCI. Although it has informally restricted UPI (for crypto exchanges), it is silent on IMPS. This point was also raised by someone in the meeting… So one wonders if IMPS can be used to transfer money to a crypto platform? We have no clarity, although I have a more fundamental question: Is NPCI allowed to impose an informal ban on UPI when the payment framework is governed by the Reserve Bank of India (RBI)? »
IMPS, or Immediate Payment Service, is a real-time payment service offered by the authority to all bank account holders in India.