2021 Master Directive on Prepaid Payment Instruments (PPIs)


By announcement dated August 27, 2021, the Reserve Bank of India (RBI) issued Master Directions on Prepaid Payment Instruments (PPIs). The MD-PPIs regulations apply to all Prepaid Payment Instrument (PPI) Issuers and System Participants. PPIs are frequently issued by banks and non-bank companies after acquiring RBI approval/authorization under the PSS Act of 2007.


  • The purpose of this Master Direction is to provide a mechanism for the authorization, regulation, and oversight of companies that issue and operate PPIs in the state;

  •  To promote responsible competition and innovation in this segment, taking into account system and transaction security, as well as consumer protection and convenience; 

  •  To ensure that Prepaid Payment Instruments (PPIs) are regulated.


PPIs are issued in the country by banks and non-bank companies after the RBI grants the necessary approval/authorization under the Payment and Settlement Systems Act of 2007. (PSS Act). The existing instructions given on the subject have been combined and unified in these Master Directions, taking into account sector changes and PPI issuer progress.


The Master Direction defines the eligibility conditions and terms of service for Payment System Operators (PSOs) in the country who issue and run PPIs.

In addition, the Master Directions on Prepaid Payment Instruments (PPIs) were published in 2021, which featured a new categorization of the instruments as well as a framework for PPI entity authorization, regulation, and surveillance. In the future, no company may set up and operate payment systems for PPIs without previous RBI approval/authorization.


PPIs requiring RBI approval before issue are currently classified as follows: - Low PPIs (Minimum-detail PPI)

  • PPIs are issued by banks and non-banks once the minimal minimum of information about the Prepaid Payment Instrument holder is obtained (mobile number verified with OTP and self-declaration of name and unique identification number of Officially Valid Document).

  • Fund transfers and cash withdrawals for the express purpose of making purchases of goods and services are forbidden.

  • Used at a predefined set of merchant locations/ businesses that have a direct line of contact with the issuer.

  • Reloadable provided exclusively in electronic form (the amount loaded in a PPI during a month must not exceed Rs. 10,000/- and the total amount loaded in a PPI during the fiscal year must not exceed Rs. 1,20,000/-).

  • At any given time, the total amount owed on such PPIs cannot exceed Rs. 10,000/-.

  • The total amount deducted from PPIs in any given month cannot exceed Rs. 10,000/-.

  • These Prepaid Payment Instruments must be converted into Full – KYC PPIs within 30 days after issue, or no extra credit will be allowed in the PPI.


Full – KYC Prepaid Payment Instrument:- Issued by banks and non-banks once the PPI holder's Know Your Customer (KYC) process has been completed.

  • Buying and selling goods and services, transferring monies, and withdrawing cash

  • The overdue amount may not exceed Rs. 2,00,000/- at any moment.

  • The monthly fund transfer limit for pre-registered beneficiaries would be Rs. 2,00,000/- and Rs. 10,000/- for all other cases.


Prepaid Payment Instrument Interoperability

PPI issuers must also adopt a board-approved policy for PPI interoperability in addition to the aforementioned requirements. Interoperability refers to a PPI's technological compatibility with other payment systems. On the acceptance side, interoperability will be essential as well.


Requirements

  • Interoperability for PPIs in wallet formats will be enabled via UPI.

  • PPIs in the form of real or virtual cards must be linked to authorised card networks.

  • Furthermore, the RBI exempted public transportation systems from Interoperability, whereas gifts (both banks and non-banks) have until March 31, 2022 to provide Interoperability.


Gift of Prepaid Payment Instruments

  • These PPIs are non-reloadable and have a maximum value of Rs 10,000/-.

  • With the exception of transfers to the "source account," no cash-outs or fund transfers are permitted.


PPIs for Public Transportation Systems (PPI-MTS)

  • They must be issued by Mass Transit System Operators following approval under the PSS Act of 2007.

  • These reloadable Prepaid Payment Instruments (PPIs) have a maximum outstanding value of Rs. 3,000/- at any particular time.


In order to issue Prepaid Payment Instruments, banks and non-banks must meet specific criteria (PPIs).

  • Banks are required to seek RBI approval under the Payment and Settlement Systems Act of 2007[1].

  • They must also apply to the Agency of Payment and Settlement Systems (DPSS), Central Office (CO), Reserve Bank of India, Mumbai, within 30 days of acquiring such approval, accompanied by a “NOC” from their regulatory department.

Additional restrictions apply to non-banks.

Any corporation formed and registered in India in accordance with the Companies Act, 1956/2013.

Foreign direct investment (FDI), foreign portfolio investment (FPI), and foreign institutional investment (FII) in non-banking firms.

The activity of issuing PPI must be documented in the MOA.

A minimum of Rs. 5 crores in positive net worth, as determined by the most recent audited balance sheet supplied with the application, as well as a certificate from a CA.

After receiving final clearance, they must have a net worth of at least Rs. 15 crore by the end of the third fiscal year, which must be maintained at all times.


PPIs issued by both banks and non-banks are issued, loaded, and reloaded.

  • Both RBI-authorized banks and non-banks are permitted to issue both reloadable and non-reloadable PPIs.

  • Along with the PPI brand, the name of the entity authorised to issue and run PPIs shall be shown, and the RBI should be notified.

  • Cash, debit to a bank account, credit and debit cards, PPIs, and other payment instruments (provided by regulated organisations in India) are all valid methods of loading and reloading PPIs.

  • Cash loading to PPIs is limited to Rs. 50,000/- per month, subject to the overall limit of the PPI.

  • PPIs might be issued in the form of cards, wallets, or any other type of device.

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