Facing the possibility of a tightening of the mobile wallet or prepaid payments instrument (PPI) guidelines by the Reserve Bank of India (RBI), the digital payments industry is planning to knock at the regulator’s door with a request for a relook into some of the regulatory proposals.“Industry participants are gathering their inputs, and the plan is to share definitive comments and suggestions with the central bank through the industry body (Payments Council of India) within the next two days,” said the chief executive of a major digital payments company, who did not wish to be identified.Founders and senior industry executives told ET that the new draft guidelines released by the RBI on April 22, if implemented in the current format, could shut down multiple business opportunities for the payments industry, which is already grappling with revenue generation challenges.“It could disrupt lines of business that payment companies have built on prepaid instruments; it will also drastically shrink the size of the business as limits have been tightened on multiple offerings,” said the chief executive of a Mumbai-based digital payments company.The draft guidelines introduced a limit of Rs 25,000 for person-to-person monthly fund transfer via wallets, reduced the cash loading limit to Rs 10,000 from Rs 50,000 previously and brought in an overall monthly balance limit of Rs 2 lakh.The regulator also suggested drastically limiting the purpose of a small PPI or a wallet with minimum know your customer (KYC) to be allowed only for purchase of goods and services and not inter-personal transactions.“This move effectively means that minimum KYC wallets cannot be used for remittance transactions even for a short period of time till they are converted into full KYC ones. This will disrupt the wallet-based domestic remittance industry,” said another senior industry executive. One of the major proposals from the industry is to conduct consultations with industry representatives and push the implementation deadline for the new guidelines by another six to twelve months.The severe restrictions in regulatory policies around mobile wallets could disrupt growth plans for large wallet companies like Mobikwik. Meanwhile, digital payments firm Paytm is trying to get back its mobile wallet licence, which it had lost after the RBI action against Paytm Payments Bank, its associate entity.Additionally, with wallet interoperability via Unified Payments Interface (UPI) still awaiting final regulatory clearance for interchange arrangements, industry insiders said they were worried that wallet payments via UPI would never pick up.A third industry executive pointed out that despite the popularity of UPI, mobile wallets have shown consistent growth. “This shows that there is a major use case for this payment instrument,” he said.According to data from the RBI, in March, 695 million transactions were settled via wallets, for a total sum of Rs 22,448 crore. A year ago, the number of transactions stood at 506 million and the value of funds settled was Rs 16,077 crore. Industry estimates suggest there are around 110 million users actively using mobile wallets for their daily requirements.A section of the industry said that the RBI might be unhappy with the misuse of mobile wallets. Adding credit on top of wallets, making them operate as credit cards, co-branded arrangements to offer cards on wallets, which are made comparable to debit cards, opening of multiple wallets for the same user are some of the things which might have irked the regulator, executives said.“There were multiple cases of fraudulent fund transfers that were done via min-KYC wallets. In fact, many merchants onboarded by wallet companies were also found to be operating fraudulently, which might have resulted in these stringent guidelines,” said the chief executive of a domestic remittance startup based in Mumbai.Another senior industry executive said that the draft guidelines show that the RBI is inclined towards banks and wants them to play a bigger role in the overall fund transfer business. Besides, with payment companies getting licensed under the payment aggregator regime, the regulator is keen that companies operate within boundaries.“The RBI has prohibited any cross-border transactions via PPI, a new restriction, thereby allowing only cross-border licence holders to offer this service,” said the executive.