Slice switches from credit line to term loans after RBI action

Fintech startup Slice has switched from providing credit lines through its app to classic term loans, after the Reserve Bank of India last month said that non-bank fintechs cannot provide credit lines. Slice was among the most exposed by the RBI’s change, and it now seems to have fundamentally altered the way it disburses credit to its customers to reflect this new restriction. 

Slice informed users of the change in an email sent on Tuesday. Entrackr reviewed a copy of the email.

A Slice spokesperson declined to comment.

The company is calling the new credit disbursal mechanism “Purchase Power,” and did not mention RBI actions leading to this change in its email. “Every time you transact with your slice card, a new approval decision will be made instantly to assess the best amount you can borrow for the purchase. The decision will be determined primarily based on merchant credibility, risk, fraud checks, and your past payments as well as repayment patterns,” Slice told customers.

“Purchase Power is an estimate of the amount you may qualify to borrow from Slice and may change at the time of the purchase, while a credit limit is a maximum amount a lender has already decided you can borrow,” the company explained in its email.

This essentially means that flexible borrower-friendly repayment terms may be replaced by a service that is identical to a regular credit card, minus the fixed credit limit. Instead of offering a credit line, Slice will now analyze borrowers’ creditworthiness during every single transaction, although that might be a line to stay clear of RBI rules again. At the end of the day, the effort is to ensure that the end customer does not go through or experience any significant change in the experience at her end, despite the significant change in the nature and princess of credit disbursal now.

The Reserve Bank of India had clarified in June that prepaid instrument (wallet) providers such as Slice are not allowed to offer credit lines. Slice and other fintechs like it had based their entire USP around such a product, and are now having to pivot to more traditional methods of lending. 

“Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007,” the circular warned. 

Correction and update (21 July): An earlier version of this article stated that the RBI had clarified that non-bank wallets were not allowed to offer a credit line. This restriction applies to all wallets. Additionally, Slice's refusal to comment on this development has been added to this story.