Why RBI is reviewing EV wallets after BluSmart collapse

The Reserve Bank of India is closely examining digital wallets used by electric-vehicle platforms, following the abrupt collapse of BluSmart, which left thousands of users unable to access funds stored in its app wallet, reported Bloomberg News.According to people familiar with the matter, the central bank has initiated informal discussions with EV charging point operators and other app-based service providers to assess potential consumer risks tied to such platforms.The trigger was the financial distress faced by users who had loaded money into BluSmart’s so-called closed-loop wallet—a payment mechanism that allows transactions only within the app’s own ecosystem.
Unlike open-system wallets regulated under RBI's purview, closed-loop wallets currently operate in a grey area, with limited oversight. This lack of direct regulation makes them especially vulnerable when a platform goes bust. In BluSmart’s case, users were informed last month that it could take up to 90 days to recover their prepaid balances. The delay, coupled with the company’s broader financial troubles and alleged fraud, has put a spotlight on the growing but loosely regulated use of such wallets within India’s digital services landscape—particularly in the EV space.Sources told Bloomberg that the RBI is now considering a set of policy options. Among them: mandatory escrow accounts to ringfence consumer funds, and possibly extending elements of the existing Prepaid Payment Instruments (PPI) framework to larger closed-loop wallets. These measures would be similar to those already in place for payment aggregators. No formal stance has been announced yet. However, a move toward tighter rules could reshape how app-based businesses handle customer funds, especially in sectors where prepaid models are central to user engagement.