RBI action on PhonePe: ₹21 lakh fine for regulatory non-compliance

PhonePe Limited has been fined 21 lakh by the Reserve Bank of India (RBI)  due to failure to comply with directives on Prepaid Payment Instruments (PPIs). The fine is after a statutory examination of the operations of the Walmart-owned payments company with regard to the operations between October 2023 and December 2024.

PhonePe RBI fine: key findings from the inspection

According to the RBI’s findings, PhonePe’s end-of-day balance in its escrow account on certain days was lower than the value of outstanding PPIs and payments due to merchants. The regulator said the company did not report those shortfalls to the central bank immediately, a reporting lapse that formed the basis for the penalty" After considering the company's reply to the notice, additional submissions made by it, and oral submissions made during the personal hearing, RBI found, inter alia, that the following charge against the company was sustained, warranting imposition of monetary penalty."
— RBI (as issued in its statement).

PhonePe RBI fine: regulatory context and definitions

Prepaid Payment Instruments (PPIs) are wallets or prepaid instruments where users load funds before spending; escrow accounts must hold these funds so customer balances and merchant obligations are fully covered at the end of each business day. The RBI’s order frames the penalty as enforcement of those escrow-maintenance and reporting requirements rather than an action that voids customer transactions. PhonePe RBI fine: implications for PhonePe and the market

The RBI clarified that the action addressed gaps in regulatory compliance and “did not impact the validity of PhonePe’s customer transactions or agreements.” The order also notes that supervisory correspondence and a show-cause process preceded the penalty. The growth comes when PhonePe is planning to hold an initial public offering in the second half of the year; Kotak Mahindra Capital, JPMorgan Chase, Citigroup, and Morgan Stanley are the managers that have been chosen by the company to handle the proposed issue. While the penalty is modest in monetary terms, it underscores heightened regulatory scrutiny of escrow maintenance and reporting ahead of an IPO.

The RBI’s order focuses on adherence to PPI escrow and reporting norms. For PhonePe, the regulatory notice is a compliance matter the company will need to address publicly and in its IPO disclosures; for the sector, the action signals continued supervisory attention to settlement-layer controls and transparency.