Recently Indian central bank Reserve Bank of India (RBI) made three main changes to the Prepaid Payment Instruments in the country.

Prepaid Payment Instruments (PPI)

PPI are means through which purchase of goods and services shall be made against the value stored in such instruments. The PPI shall be used as magnetic stripe cards, smart cards, internet accounts, mobile accounts, online wallets, paper vouchers or any other instrument used to access a prepaid amount.

Recent three changes RBI made in PPI

In the year 2018, the Prepaid Payment Instruments were provided the option of becoming interoperable. Under this option, the customers of one company shall send funds to the customers of other company or bank or PPI. Reserve Bank of India provided this option only to those cases where a complete KYC is done. Even after 2-years, the migration towards KYC Prepaid Payment Instruments has not been achieved. KYC is Know Your Customer.

Thus, to increase the migration of Prepaid Payment Instruments to full KYC, the following changes have been introduced

  • The limit of outstanding balance in Prepaid Payment Instruments is to be increased from the current level of Rupees 1 lakh to Rupees 2 lakhs.
  • The facility of cash withdrawal is to be permitted for full KYC PPIs of non-bank Prepaid Payment Instruments issuers.
  • The membership to RBI-operated Centralised Payment Systems (NEFT and RTGS) are to be opened to non-banks such as the RBI regulated payment system operators.

Categories of Prepaid Payment Instruments used in India

  • Semi-Open System Payment Instruments
  • Semi-Closed System Payment Instruments
  • Open System Payment Instruments Mobile Prepaid Instruments

Closed System Payment Instruments: They are issued by a person. They are issued to facilitate purchase of goods from him or her.

Semi-Open System Payment Instruments: They can be used at any card accepting merchant sale terminals. They do not allow cash withdrawal or redemption.

Semi-Closed System Payment Instruments: They are redeemable only at a group of identified merchants. They do not permit cash withdrawal or redemption by the holder.

Open System Payment Instruments: It allow cash withdrawals at ATMs and can be used for purchase of goods.

The Mobile Prepaid Instruments are issued by the mobile service providers (MSP).

What are Prepaid Payment Instruments PPI