Thursday, May 19, 2022

Indian Banks Warn Users Against Crypto, Uses Three-Years Old Quashed Notification

Indian banks restricted dealing in crypto-related activities since the Reserve Bank of India (RBI) unofficially asked them. Now, financial institutions are urging customers to not get involved in crypto-related activities. 

A report published by Bloomberg Quint, states that some of the financial institutions in India have started to seeking details from their customers regarding crypto transactions. A few of the banks like HDFC Bank and the State Bank of India (SBI) have reached out to their customers and asked them to stop trading in crypto.

As soon as the banks started taking action, many of the users took this matter to social media platforms and raised questions over the issue.

Rinku Saini, a content creator and a crypto investor from India, received a mail from HDFC Bank specifying that he has been using his bank account to process the crypto-related transaction which as per the RBI’s guidelines are not permitted.

The mail received by Saini quoted the RBI’s 2018 order, in which it asked the bank to not provide its services in crypto-related activities. However, in 2020, the Indian central bank’s order was quashed by the Supreme Court.

On one hand, the RBI banned the financial institutions from working with the companies related to cryptocurrency, while on the other hand, the SC announced that RBI’s ruling lacks proportionality, therefore, the apex court overturned the central bank’s decision.

However, a few weeks ago, the central bank of India informally contacted the financial institutions and urged them to cut off their ties with the crypto-related activities. Soon after that, some of the leading financial institutions in the country like ICICI Bank, YES Bank, Paytm Payment Bank withdrew their services from the companies. Due to this, the crypto exchanges stopped accepting the payment in rupee deposits from their users. 

While raising his concern over this issue, the CEO of WazirX, Nischal Shetty, tweeted that the top Indian banks have cut their ties with crypto startups in the country, therefore, he requested the RBI to intervene in the matter and help the crypto industry.

The SBI wrote a letter citing RBI’s guidance and specified that the central bank has always released a notification for the users, cautioning them about the risk involved in dealing with cryptocurrencies. The bank further in its letter mentioned that the crypto entities operating various schemes in the country, which are not regulated by RBI.

Manoj Nagpal, an employee at Outlook Asia Capital, tweeted the above-mentioned letters by the SBI on the social media platform.  

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