The Reserve Bank of India (RBI) ordered Bengaluru-based buy-now-pay-later (BNPL) startup Simpl to stop all its payment operations immediately. The regulator said that Simpl ran payment system functions like payment, clearing, and settlement without proper authorisation under the Payment and Settlement Systems (PSS) Act, 2007. The central bank took this step after it reviewed Simpl’s operations and found that the company did not hold the certificate that the law requires.
This action has created a shockwave across the fintech sector because Simpl had built a large network of merchants and customers. The order highlights how regulators want strict control over companies that move money in the economy.
RBI’s Findings and Direct Order
RBI reviewed Simpl’s business model and concluded that the startup acted as a payment system operator. Under Indian law, any company that handles the processes of payment, clearing, or settlement needs a Certificate of Authorisation from RBI. Simpl never applied for or obtained this authorisation.
RBI invoked Section 4 of the PSS Act. This section clearly states that no company can start or run a payment system without RBI approval. RBI sent a letter to Simpl’s management that directed them to stop operations immediately. The letter also asked the company to settle all dues with users and merchants without delay. RBI instructed the company to route these settlements through verifiable bank accounts.
By acting in this way, RBI made it clear that it will not allow fintech startups to run financial operations without following the law.
What the PSS Act Says
The PSS Act of 2007 governs how payment systems in India must function. This law gives RBI the authority to regulate, supervise, and even revoke authorisations if companies break rules. The Act covers payment operators such as wallets, prepaid cards, UPI apps, and payment aggregators.
The law says that every company in this space must follow strict standards. These include risk management, customer protection, reporting of operations, and governance checks. RBI created these rules to protect the financial system from risks like fraud, money laundering, and operational failure.
The Act also gives RBI the power to punish any company that operates without a licence. Simpl fell into this category because it offered payment, clearing, and settlement services directly to customers and merchants without the required certificate.
Simpl’s Business Model
Simpl worked as a buy-now-pay-later provider. The company allowed customers to shop online or use services and pay for them later, usually within 15 days, without interest. Merchants paid Simpl a fee to provide this service because it helped them increase sales.
Simpl built partnerships with major names in India’s online economy. Its clients included Zomato, BigBasket, Rapido, and Box8. The company claimed that more than 26,000 merchants used its system. Customers could use Simpl for groceries, food delivery, medicines, and other purchases.
Unlike some other BNPL players, Simpl did not tie up with a regulated bank or a non-banking financial company (NBFC). Many BNPL startups act as a front for NBFCs that actually provide credit. Simpl instead positioned itself as a payments utility, which allowed it to scale faster. However, this model also meant that it avoided the strict regulatory licences that other financial firms must obtain.
Simpl raised around 83 million US dollars in funding over the years. Global investors like Valar Ventures, DIA Investments, Hard Yaka, and FJ Labs backed the company. The startup was founded by Nitya Sharma, a former Goldman Sachs vice president, and Chaitra Chidanand, who left the company in 2020.
This business model worked well for rapid growth. But RBI’s intervention shows that the regulator does not accept fintechs running financial services without clear authorisation.
ED Probe Deepens Trouble
Simpl already faced another regulatory storm before RBI acted. The Enforcement Directorate (ED) started an investigation into the company earlier in July 2025. The ED accused Simpl and its founder of foreign exchange violations worth about ₹914 crore under the Foreign Exchange Management Act (FEMA), 1999.
Investigators said that Simpl raised money from foreign investors by claiming it offered technology services. However, the company allegedly used those funds for financial services like credit and payments. ED argued that such activities require prior government and regulatory approvals under India’s FDI rules.
The agency also said that Simpl issued convertible notes to foreign investors without the necessary permissions. According to ED, this violated FEMA provisions because it counted as investment in financial services, which faces tighter regulation.
This ED probe increased the pressure on Simpl. Even if the company solves its issues with RBI, it still has to fight the allegations under FEMA.
Impact on Simpl
The RBI order hit the heart of Simpl’s business. Without permission to run payment, clearing, or settlement functions, the company cannot continue its BNPL services in the same way. Customers will not be able to use Simpl at checkout, and merchants will lose a payment option that boosted their sales.
Simpl must also clear all dues it owes to merchants and users. This includes settling outstanding bills for transactions already made through the system. If the company delays or fails, RBI can take stronger enforcement action.
The company also faces reputational damage. Investors may hesitate to support it further. Merchants may move to other BNPL providers or payment gateways. Customers may lose trust in using Simpl for their transactions.
Impact on the BNPL Sector
The RBI’s move against Simpl will affect the entire BNPL and fintech sector in India. Many BNPL startups operate in a grey area between technology and financial services. RBI’s message is clear: if a company handles payments or settlement, it must obtain an authorisation under the PSS Act.
This order will force other BNPL firms to review their models. Companies may choose to apply for NBFC licences, partner with banks, or restructure their services to comply with regulations. Fintechs can no longer claim that they only provide “tech services” when they actually move money.
Globally, regulators have raised similar concerns about BNPL models. They fear that these services encourage overspending by consumers, expose lenders to bad debt, and create risks in the financial system. India’s central bank has now taken a strict stand by shutting down operations of one of the country’s leading BNPL players.
Possible Future for Simpl
Simpl has a few options if it wants to survive:
- Apply for Authorisation: The company can try to get a Certificate of Authorisation under the PSS Act. This would require it to meet RBI’s strict standards for governance, capital, and operations.
- Partner with Licensed Entities: Simpl can restructure itself as a front-end platform and let licensed banks or NBFCs handle the actual financial functions.
- Acquire an NBFC Licence: Simpl can turn itself into a regulated financial company. This path, however, will demand high compliance costs.
- Pivot the Business: If Simpl cannot meet regulatory standards, it may choose to pivot into pure technology services instead of financial services.
Whatever path Simpl takes, it will need to win back the trust of regulators, investors, and customers.
Conclusion
The RBI’s decision to order Simpl to stop payment operations marks a turning point in India’s fintech story. The central bank showed that it will not allow any company to run financial services without clear authorisation. The ED’s investigation into foreign exchange violations has made the situation even more serious for the startup.
Simpl’s case highlights the challenges of building a fintech company in a heavily regulated space like finance. While innovation can bring new services to customers, regulators demand that companies follow the law to protect the stability of the financial system.
The fallout from this case will not stay limited to Simpl. Other BNPL and fintech players must now rework their models to ensure compliance. For India’s digital economy, this moment may become a turning point where growth and regulation must go hand in hand.
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