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India central bank orders SBM local unit to stop outward remittance transactions

India's central bank has directed SBM Bank India to stop all outward remittance transactions in a blow to the bank and many of its fintech partners that offer services allowing users to invest in foreign services.

The Reserve Bank of India (RBI) said in a brief statement Monday that it has ordered SBM Bank India to stop all transactions under Liberalised Remittance Scheme (LRS) till further orders.

LRS is a set of guidelines by the RBI that enable Indian residents to remit capital overseas.

"Certain material supervisory concerns" at the bank prompted the central bank to reach the decision, RBI said.

SBM Bank India is one of the most fintech-friendly startups and has tie ups with dozens of young firms.

A number of startups -- including INDMoney, Vested and NiYO Global, according to descriptions on their websites -- have tieups with the bank to offer their customers a number of features, including forex transactions and the ability to purchase foreign stocks.

Some of these startups are already working to partner with an alternative bank, according to a source familiar with the matter.

SBM Bank India was in talks late last year to raise between $50 million to $75 million at a pre-money valuation of about $200 million, TechCrunch reported earlier.