PhonePe, the digital payments platform backed by Walmart, faces a fresh regulatory setback on its road to public listing. The Reserve Bank of India (RBI) has imposed a fine of ₹21 lakh on PhonePe Limited for breaking prepaid payment instrument (PPI) rules.
RBI Finds Compliance Gaps
RBI discovered that PhonePe’s escrow account balance did not match the value of outstanding prepaid wallets and payments owed to merchants on several days. Moreover, PhonePe failed to quickly inform the regulator about these shortfalls. RBI’s statutory inspection, which covered operations between October 2023 and December 2024, led to this penalty under the Payment and Settlement Systems Act, 2007.
Company Responds, RBI Clarifies
After supervisory findings, RBI sent a notice to PhonePe asking for an explanation. The firm provided its reply and made submissions, but the charge was confirmed and the penalty was imposed. RBI further clarified that this penalty is only for compliance deficiencies. It does not affect transactions or agreements with PhonePe customers. The central bank insists that payment companies in India must strictly follow escrow account and reporting norms to boost transparency and user protection.
Upcoming IPO Under Spotlight
This regulatory action arrives just as PhonePe is gearing up for its highly anticipated IPO later this year. Top investment banks such as Citigroup, JPMorgan Chase, Morgan Stanley, and Kotak Mahindra Capital are reported to be managing the issue. The company recently restructured, switching from a private to a public entity in April. Its finances are improving—PhonePe’s operating revenue jumped 74% to ₹5,064 crore in FY24 and net loss narrowed by 29% to ₹1,996 crore.
India’s Payment Rules Tighten
RBI is tightening its grip on digital payment companies. New rules mean all platforms must keep proper funds in escrow and report any mismatches immediately. Such actions reinforce RBI’s drive to make Indian digital finance safer and more reliable for users, merchants, and investors.
What’s Next for PhonePe?
The penalty is a sharp reminder for other fintech players ahead of big public offerings. PhonePe now has to review its systems and reporting to avoid future regulatory trouble. Indian users and merchants remain unaffected, but all eyes are now on how PhonePe manages regulatory trust as it speeds toward its IPO.