Users not able to deposit money on Indian crypto exchanges right now, as banks get cold feet

• According to media reports, an unofficial guidance from the Reserve Bank of India has put banks and lenders on the edge.
• There’s also not much that the exchanges can do, unless they want to sue the banks for wrongfully discriminating against them.
• Industry executives have said that they are working to get more bank partners onboard.

Cryptocurrency exchanges in India have been blocking deposits in Indian rupee for just about a week now. Two of the top exchanges — WazirX and Coinswitch Kuber — informed users that the last payment methods they had, PayTM, would also be shut down from May 20th onwards. Of course, these two aren’t the only ones who have been having troubles taking deposits from Indian users, platforms like Zebpay and Unocoin have also had to block all rupee deposits over the past few days.

Why are rupee deposits not working?

According to media reports, an unofficial guidance from the Reserve Bank of India (RBI) has put banks and lenders on the edge. The informal communication from the RBI affected the already rocky relationship crypto companies and exchanges had with banks in India, and many banks started shutting down their bank accounts.

“If you make any INR deposit via IMPS/NEFT/RTGS to our PayTM Bank account after 11:59 p.m IST, it will revert to your source bank account within 7-10 business days,” WazirX said in an official communication to users on May 20.

When you make a deposit to any exchange, the money goes from your bank to a payment processor (also called a payment gateway), which then sends it to the crypto exchange’s bank account. In the current situation, you are free to make a transaction through UPI etc, but there are no accounts to receive that money on the other end. As a result, the transaction fails for all intents and purposes, and it takes days and even weeks to reverse the trail of cash back to your account.

Can banks do this without an official directive?

It’s just like a restaurant can reserve the rights of admission for its guests, banks can choose not to do business with any entity. This is why banks can stop doing business with crypto companies despite the Supreme Court striking down the RBI’s official directive in March last year. The RBI guidelines have simply put them on the edge, and they’re choosing not to lend money, fearing what future regulations might lead to.

There’s also not much that the exchanges can do, unless they want to sue the banks for wrongfully discriminating against them. While India’s crypto industry has done well over the past year, it’s unlikely that crypto companies will want to take on expensive lawsuits right now. Industry executives have said that they are working to get more bank partners onboard.


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