RBI bans virtual accounts with non-banks

The Reserve Bank of India (RBI) has directed a leading internet-based financial services provider to stop operating "electronic purse schemes". An electronic purse scheme asks individuals to open accounts and fund them by transferring money from their bank or credit card accounts.

In a notification, RBI has also asked banks to dissociate themselves from electronic purse schemes. The central bank has, however, not named the entity which it asked to desist from operating electronic purse schemes for various services including airline and hotel bookings.

According to sources, the firm under the RBI scanner is a financial services portal which asks its user to open accounts for shopping online, sending money to relatives and friends, paying utlity bills online and much more. In case the accounts balance falls short at any point, it advises the users to add more money.

To add money, one needs to submit the PAN number. Money is added to the account via internet banking or using credit cards. The customer needs to ensure that his bank account has been activated for third party transfers.

The funds also provides remittance services. RBI said electronic purse activities were in the nature of acceptance of deposits which could be withdrawn on demand.

The act of accepting deposits repayable on demand violates the provisions of the Reserve Bank of India Act, 1934, governing registration of NBFCs and acceptance of deposits.

While the virtual accounts of such individuals are credited, the actual money is credited into the current account of the service provider with a clearing and settlement bank.

The electronic purse account holders are allowed to use funds in their accounts either to transfer the funds to another electronic purse accounts, transfer to any other account anywhere through RBI's real-time gross settlement (RTGS) system or make on-line purchases.

"The RBI move will not dampen the spirit of on-line shopping in general as all portals do not run electronic purse schemes. Only one or two players will be affected," said a senior banker.