Indian banks are still hesitant in providing financial services to crypto companies and investors despite recent regulatory developments, due to lack of clarity from the central bank.
Six banks Forkast spoke to declined to comment, stating they are unsure how the Reserve Bank of India (RBI) would react to any comment made by a bank on facilitating crypto trading in India. Banks also said, on condition of anonymity, that any facilitation would depend on RBI guidelines and that they are waiting for it.
RBI had banned banking services for crypto companies in a 2018 circular that was struck down by the Supreme Court in March 2020. But today, some banks still don’t allow crypto transactions citing non-compliance issues, which is slowing down local adoption.
“Banks do not want to participate right now because they don’t have full clarity from RBI or the government yet,” said Bhagaban Behera, co-founder and CEO of local crypto exchange Defy.
Based on Behera’s experience, less than half the banks in India are currently willing to provide crypto-related services.
“Just a couple of smaller banks in India are comfortable allowing investors to open bank accounts and exchanges to have transactions,” Behera said. “That’s the real challenge right now.”
India’s finance minister Nirmala Sitharaman announced in her budget speech on Feb. 1 that RBI will launch a central bank digital currency in the financial year beginning April 1, which may have to compete with crypto if legitimized. The minister also announced plans for a 30% tax on crypto income, spreading hopes for crypto legalization in the country.
“Taxation does not mean anything to banks,” said Sathvik Vishwanath, CEO of Indian crypto exchange Unocoin. “Tax [liability] is on the individual — on what he or she files in income declaration every year — not on the banks.”