BluSmart Collapse raising concerns: RBI Investigation Begins

All digital wallets linked to electric vehicle (EV) platforms will be reviewed by The Reserve Bank of

India after it noticed a sudden collapse of BluSmart, the country's largest all-EV taxi service. This

resulted in thousands of users being unable to access funds stored in the app’s wallet as reported by

Bloomberg. EV charging-point operators and app-based EV service providers are planning to meet for an

informal discussion initiated by RBI. This progressive step is taken to assess the consumer risk in the

segment.

RBI took the decision after BluSmart users were left without access to their preloaded funds into the

platform's closed-loop wallet. A fraud allegation has been charged against the company.

Closed-loop wallets is a fast-growing company expanding across India’s digital services landscape. This

app can only be used within a single app or service ecosystem. Generally, open-system wallets are

regulated by the RBI. As these closed systems operate outside direct regulatory oversight, they are usually

exposing consumers to higher risks if a platform collapses. BluSmart has informed its users in April to

refund the wallet balances in the next 90 days, which is leading to widespread concern within customers.

This disruption is also drawing the regulator's attention to the need for protective mechanisms.

No formal comment has been issued from the Reserve Bank of India however they have started

considering new safeguards. During the discussion, RBI mentioned to mandate escrow arrangements for

funds held in app-specific wallets, similar to the rules applicable to payment aggregators. RBI also

referred to the application of Prepaid Payment Instruments (PPI) framework to large-scale closed wallets.

As prepaid balances are considered a key strategy for user retention and service monetization. There’s a

prediction that the regulator will hold a meeting with stakeholders in the coming weeks to deliberate on

the issue. Currently no final decision has been made, nor any move toward tighter regulation which can

significantly impact India’s digital economy.