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In regard to non-compliance with prepaid payment instruments (PPIs) and know your customer (KYC) norms, the Reserve Bank of India (RBI) has imposed a monetary penalty of Rs 1.68 crores on OLA's subsidiary leg, Ola Financial Services Private Limited, under Section 30 of the Payment and Settlement Systems Act, 2007.
The bank took its decision based on the company's irresponsibility to comply with the direction and its non-intention to validate the transaction or agreement entered into with the customers.
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RBI's reasoning for imposing the penalty on Ola Financial Services (OFS) mentioned that earlier a show-cause notice was sent to the company for breaching the KYC norms, but it didn't get a suitable answer.
It was only when the company had responded to RBI, that it concluded that the aforesaid imposition of a monetary penalty was necessary in relation to the non-compliance with RBI directions.
As per regulatory documents assessed by PTI, Ola had reportedly planned investment of up to Rs 786.1 crore in its subsidiary OFS in December 2021.
“OFS has partnered with the leading merchants in the market and has launched a variety of products in the lending and insurance businesses, including Ola Money, OlaMoney Postpaid, and OlaMoney Credit cards. Also the company is also looking to expand into loans offering in the form of two-wheeler, four-wheeler, and personal loans to offer an all-in-together financial product to their customers.” a senior manager at OFS said.
OFS had announced its plan to acquire Avail Finance, a neo-bank in March 2022 which has six million customers and would provide financial services to the blue-collared workforce. This move from Ola's edge will give them a broader push into the fintech space and build a base for their financial service business.
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