M-wallets or mobile wallets have gained exponential popularity among masses. Owing to the demonetization, the wallets made inroads into smaller towns as well and started to getting accepted even at the smaller outlets. The mobile wallet transaction size is estimated to be at Rs 800 billion in last year which is over 100% growth in comparison to the previous year.
With the growing popularity the wallets are extending all possible payment avenues to the wallet holders. From recharge of phones and direct to home connection, electricity bills to travel and from movie tickets to grocery purchase, there is hardly any transaction that possibly cannot be undertaken through wallet.
But as the wallets continue on their spiraling growth path, they may still not get utilized for undertaking each and every transaction. One still may not be able to pay the car loan or any other loan EMI via convenient applications of these electronic wallets. But before we dwell further into the reasons for this limitation, let us also understand that as of now, there are a few wallets through which one is in a position to make a onetime payment to the specified banks or other non-banking financial companies through the wallet. But making a regular payment is not the option available today.
Loan repayment working
At the point of disbursal, the lending institution enter into an agreement with the borrower which states that the repayment of monthly installment will happen in a particular day of every month. The EMI actually gets impacted with the date of repayment. Based on this repayment date only the interest gets charged. The installment gets collected on this agreed date through the standing instruction given to bank via NACH. Giving a standing instruction for repayment of EMI is not possible through the wallets as of now and hence it will not be possible to repay the loans.
The wallets can be funded not only through the balance in one’s bank account but even the credit cards held by the individual. As per regulation, repayment of a loan through a credit card is restricted. This makes it restrictive to use for repayment of the loan installments. In this case one would be repaying the loan through another loan which actually comes at a higher rate of interest.
We all know that in case one revolves the outstanding amount on the card, there is a hefty rate of interest getting charged. In some cases the effective rate can also be as high as 50% per annum. So while there is a regulatory limitation, paying through wallet by using credit card will not be a good option. And if this limitation is lifted, then people might actually start using the option of funding the wallet through the cards to repay car loan EMIs.
The RBI controls
The lending in India can only be performed by the approved institutions. All these lenders are regulated by the Reserve Bank of India. The RBI not only regulates the lending but also keeps a close watch on the repayments of these loans. Now if the repayment is happening outside the RBI framework the same may not get tracked and monitored effectively.
The repayments then also get reported to the bureaus. This helps one reflect his strength of his credit behavior through the credit report. There might be a situation where the payments received outside the framework do not get reported to the bureaus and result in impacting the credit profile of the individual.
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