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Slice's Fundraising Hits Roadblock Following RBI Directive About PPIs Loading Credit Lines

After entering the unicorn club last year, the fintech was trying to raise an additional $50 million through a new funding round

Bengaluru-based fintech start-up, Slice, was in talks with existing and potential investors to raise an additional $50 million in a new funding round. However, these plans have not hit a roadblock after the Reserve Bank of India (RBI) issued a circular barring prepaid payment instruments (PPIs) from loading credit lines. 

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Reporting this development, Economic Times added that the company does have adequate capital from its previous funding round. Now, investors are awaiting clarity about the RBI diktat and its implications for the fintech ecosystem and its business models before taking any fiscal decisions.

RBI Cracks The Whip 

On 20 June, RBI asked non-bank wallets and pre-paid cards from loading their credit lines into these platforms with immediate effect. This is seen as an attempt to prevent fintech and NBFCs from operating as neo-banks to offer credit lines. 

Its circular stated, "The PPI-MD does not permit loading of PPIs from credit lines. Such practice, if followed, should be stopped immediately. Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007."

Currently, RBI states that pre-paid instruments can be loaded using cash, bank accounts, and credit and debit cards. The guidelines do not allow credit lines to top up these instruments. 

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The Payments Council of India (PCI) and several fintech requested the government to step in to resolve the fallout from the RBI directive. Most new-age fintech start-ups challenged their legacy peers with their credit card offerings. However, they now find themselves on a sticky wicket as the RBI directive has queered the pitch. This might impact their ability to raise funds in an already challenging funding landscape. 

Slice Of The Fintech Pie

Rajan Bajaj founded Slice in 2016, offering credit and payment cards in association with Visa and SBM Bank. His target was young and first-time consumers with limited to no credit history. 

The company recently rolled out its UPI payments product, shifting its focus from providing credit to offering overall payments. This shift pitches it against competitors like Paytm, PhonePe, Google Pay, and BHIM.

In June 2022, Slice said in a filing with the Registrar of Companies that it had received shareholders' approval to raise Rs 200 crore by allotting Non-Convertible Debentures (NCDs), which was reported by YourStory first. The start-up did not reveal the timeline for the debenture issue, though. 

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The fintech turned into a unicorn after it raised $220 million from Tiger Global and Insight Partners in its latest funding round late last year. This came a month after the fintech start-up raised $50 million as part of its Series C round from Tiger Global Management, Moore Strategic Ventures, Insight Partners, and GMO VenturePartners. 

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