Why is BNPL Player Simpl Pay Not Working?

As per the news reports, the Reserve Bank of India (RBI) has intensified its scrutiny of digital lending by directing Simpl, a Bengaluru-based buy now pay later (BNPL) provider, to immediately halt its payment operations. The move underscores the RBI's regulatory authority over all digital payment platforms operating without proper licenses.

RBI Halts Simpl's Payment Operations Over Regulatory Breach

On September 29, 2025, the RBI directed Simpl to cease its payment services for allegedly operating without formal approval under the Payment and Settlement Systems Act, 2007. Simpl, managing payments for over 26,000 merchants, offered deferred payment options at checkout, a key element of BNPL services. The RBI found that Simpl conducted unauthorised clearing and settlement, necessitating urgent regulatory correction.

BNPL Sector Faces Growing Oversight

In recent years, the BNPL market in India has expanded rapidly, offering users instant credit while bypassing traditional credit checks. However, the RBI has repeatedly highlighted concerns regarding unsecured lending, lack of transparency, and insufficient consumer protections. In 2022, BNPL firms were already barred from loading prepaid payment instruments with borrowed funds.

Read More: RBI Directs BNPL Provider Simpl to Halt Payment Operations!

Foreign Exchange Law Violations Raise Additional Concerns

In addition to operational irregularities, the Enforcement Directorate (ED) is probing Simpl over possible breaches in foreign direct investment (FDI) laws. The firm reportedly received ₹913 crore by declaring itself under the IT services category, which permits 100% automatic FDI. Regulatory reviews revealed Simpl's activities fell under financial services, which require prior government approval.

Simpl’s Business Model and the Defence

An anonymous Simpl executive stated that the company uses its own collateralised funds and doesn’t charge interest. Instead, it earns through merchant fees and charges a flat late fee to avoid interest accumulation for consumers. Nonetheless, this model does not exempt firms from obtaining proper regulatory permissions when facilitating consumer credit at scale.

Conclusion

The RBI’s action against Simpl is a clear indication of tightening control over India's digital credit landscape. With both operational and legal compliance now in focus, all BNPL operators will likely face increased scrutiny to ensure alignment with regulatory frameworks.

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