The Reserve Bank of India (RBI) on Monday said that banks cannot quote its April 2018 circular to restrict their customers from dealing in cryptocurrencies.
The banking regulator, however, said that lenders should carry out customer due diligence processes in addition to other provisions under the Foreign Exchange Management Act (Fema) for overseas remittances.
The clarification comes amid reports that some banks, including HDFC Bank, have cautioned their customers against dealing in cryptocurrencies. The lenders are understood to have also warned that if they continue to do so, their services may be curtailed.
Similarly, SBI Cards has also sent an email to some of its customers saying that they cannot use their cards for transacting in virtual currencies and if they do so, it would lead to suspension of the credit card. Earlier, there have been reports of few private sector lenders making it difficult for crypto currency exchanges by pushing payment processors to stop facilitating crypto transactions.
All these banks cited a circular from the RBI in April 6, 2018 which said that regulated entities will not deal in virtual currencies or provide services to facilitate any person or entity in dealing with or settling these currencies.
These services included maintaining accounts, registering, trading, settling, clearing, giving loans against virtual tokens, accepting them as collateral, opening accounts of exchanges dealing with them and transfer or receipt of money in accounts relating to purchase or sale of virtual currencies. However, the Supreme Court had struck down that circular.
In a circular on Monday, the RBI said that it has come to its attention through media reports that certain banks and regulated entities have cautioned their customers against dealing in virtual currencies by making a reference to the April 2018 circular.
“Such references are not in order as this circular was set aside by the Supreme Court on March 4, 2020... the circular is no longer valid from the date of the Supreme Court judgment, and therefore cannot be cited or quoted from,’’ it said.
