The Reserve Bank of India (RBI) has levied a fine of ₹21 lakh on PhonePe Limited due to non-compliance with specific guidelines for Prepaid Payment Instruments (PPIs).

The decision follows a statutory inspection conducted by the RBI, which scrutinized PhonePe's operations from October 2023 to December 2024. The inspection revealed that PhonePe did not adhere to certain directives issued by the central bank. Subsequently, the RBI sent a notice to PhonePe, asking the company to explain why penalties should not be imposed for these violations. PhonePe responded to the notice with written and oral submissions during a personal hearing. After reviewing PhonePe's response and additional submissions, the RBI determined that the charges against them were justified.

The RBI found that the end-of-day balance in PhonePe's escrow account was less than the value of outstanding PPIs and payments due to merchants on certain days. Furthermore, PhonePe did not promptly report this shortfall to the RBI.

The central bank has clarified that the penalty is strictly related to regulatory compliance deficiencies and does not reflect on the validity of any transactions or agreements PhonePe has with its customers. The focus remains solely on adherence to established norms.

This isn't the first time the RBI has taken action against PPI issuers for violating regulations. In 2019, the RBI imposed penalties on five PPI issuers, including Vodafone m-pesa and PhonePe.