RBI Fines IPO-Bound PhonePe For Flouting PPI Norms

The Reserve Bank of India (RBI) has imposed a monetary penalty of INR 21 Lakh on IPO-bound PhonePe Limited for violating norms related to Prepaid Payment Instruments (PPIs).

“The penalty has been imposed in exercise of powers conferred on RBI under the provisions of Section 30(1) read with Section 26(6) of the Payment and Settlement Systems Act, 2007,” the central bank said in a statement.

The RBI conducted a statutory inspection on the fintech major’s operations between October 2023 and December 2024 found that. During the inspection operations, the apex bank found out that the “end-of-day balance” in the Walmart-owned startup’s escrow account was less than the value of outstanding PPIs and payments due to merchants for several days.

After receiving an inadequate response from the fintech on its show cause notice, the RBI deemed it necessary to impose a monetary penalty on the company.

In a separate statement, the central bank notified that fintech surrendered its NBFC license on August 29. This is after PhonePe surrendered its NBFC-AA licence to the RBI earlier this year, and initiated the wind down of its AA operations.

The regulatory action comes ahead of PhonePe’s anticipated initial public offering (IPO). As per reports, the company is expected to pre-file its IPO papers later this month, aiming to raise between $1.2 Bn and $1.5 Bn (INR 10,000 Cr–13,000 Cr) at a valuation of around $7 Bn to $8 Bn.

The IPO is expected to consist of a mix of fresh shares and an offer-for-sale (OFS). While parent company Walmart is unlikely to dilute a significant portion of its stake, other investors such as Tiger Global and General Atlantic may pursue partial exits.

In a separate development, Inc42 reported the company was launching an employee stock option (ESOP) buyback programme worth INR 700 Cr to INR 800 Cr, making at least 1,000 employees eligible yesterday. The move is part of the company’s efforts to reward staff ahead of its much-anticipated IPO.

Meanwhile, PhonePe continues to dominate India’s UPI payments ecosystem, processing 915 Cr transactions worth nearly INR 12 Lakh Cr in August 2025, giving it a 46.5% majority market share.

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