Banks in India have started cautioning customers of possible restrictions if they are found involved in cryptocurrency transactions. Email notices issued by the HDFC Bank to customers cite the Supreme Court struck down circular of RBI dated April 6, 2018. The notices reviewed by the CryptoVakil team advise users to visit the nearest HDFC Bank and clarify the nature of certain transactions. Customers of the largest private lender have also reported receiving the same communication in a physical paper format.
The April 6 RBI circular prohibited RBI-regulated entities from dealing in virtual currencies or provide services for facilitating any person or entity in dealing with or settling virtual currencies. The Supreme Court in March 2020 quashed the Circular holding prohibition as disproportionate when there is no ban on virtual currencies in India. The HDFC notice appears like a template mail prepared without considering the Supreme Court judgement. The notice asking customers to visit the nearest branch does not consider the pandemic resulting in many physical activities moving to virtual space.
SBI Cards, the subsidiary of India’s largest lender had issued similar notices to its customers. SBI cited public cautions issued by RBI on the risks associated with virtual currencies. The SBI notice did not cite the April 6 circular. “Please note, usage of credit card for transactions on virtual currency merchant platforms may lead to suspension/cancellation of your SBI Credit Card in terms of the Cardholder Agreement,” an email notice from SBI read. This is the first time after March 2020 that banks have formally cautioned customers from dealing in virtual currencies.
RBI earlier this month had informally asked banks and financial institutions to cut ties with crypto exchanges which resulted in delayed payments. Paytm Payments Bank which served as an anchor bank for many crypto exchanges, cut ties with the exchanges earlier this month resulting in the exchanges looking for alternatives including promoting P2P transactions.
Several crypto exchanges in India are now contemplating approaching the Supreme Court against the informal ban imposed by RBI.