Just-In: RBI Clarifies Banks Can’t Use 2018 Circular to Deny Customer Transactions

Reserve Bank of India (RBI), the Indian central bank today issued a clarification about recent reports of certain banks using its 2018 circular to caution customers against crypto transactions. RBI said that Banks cannot use the quashed 2018 circular to deny transactions to customers. The official classification read,

It has come to our attention through media reports that certain banks/ regulated entities have cautioned their customers against dealing in virtual currencies by referring to the RBI circular DBR.No.BP.BC.104/08.13.102/2017-18 dated April 06, 2018. Such references to the above circular by banks/ regulated entities are not in order as this circular was set aside by the Hon’ble Supreme Court on March 04, 2020, in the matter of Writ Petition (Civil) No.528 of 2018 (Internet and Mobile Association of India v. Reserve Bank of India). As such, given the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgment, and therefore cannot be cited or quoted from.

Two major Indian banks HDFC and SBI were seen sending out emails or cautionary notices for customers involved in crypto transactions, asking them to avoid any such transactions through their network citing the 2018 quashed circular. The clarification could come to the rescue of both customers as well as crypto exchanges who have complained about banks’ noncompliance as well.

Can RBI’s Clarification Come to the Rescue of Crypto Exchanges in India?

The said RBI circular issued in April 2018 prohibited banks in the country from offering their services to crypto platforms, which was later overruled by the Supreme Court in March last year. However, despite early compliance banks started to block services to crypto platforms claiming no regulatory clarity to be the reason. This also led to several service outages and great difficulty in depositing and withdrawing from crypto exchanges.

The current clarification from the Indian Central Bank might resolve the issue in the short term, but the obscurity around regulations could cause friction between the banking system and crypto platforms again.