RBI issues Master Directions on Prepaid Payment Instruments (PPIs)
The Reserve Bank of India (RBI) in its notification dated 28th August 2021 issued Master Directions on Prepaid Payment Instruments (PPIs). The master direction creates new classifications of the instruments. No entity can set up and operate payment systems for PPIs without prior approval of RBI.
What are Prepaid Payment Instruments?
PPIs are pre-loaded cards/digital wallets. For example, Sodexo offers PPI cards wherein companies can deposit funds onto employees’ meal cards. This can be used on Sodexo’s network for the purchase of food and non-alcoholic beverages. PPI e-wallet apps such as Paytm or Phonepe allow customers to deposit funds into the app so that they can spend the funds through the app itself.
The master directions classify PPIs into two categories – Small PPIs and full KYC PPIs. Earlier, PPIs were classified as closed systems, semi-closed systems, and open system PPIs. Small PPIs can have cash up to Rs. 10,000 per month and not exceeding Rs. 1.2 Lakh in a year. Further, a small PPI can have a cash loading facility too. Full-KYC PPIs will be issued by Banks and non-banks after completing Know your Customer (KYC) of the PPI holder. Additionally, the circular provides for the following specific categories of PPIs:
Gift PPIs
In this, the maximum value of each such prepaid gift, the instrument shall not exceed Rs. 10,000. Such an instrument is not reloadable. Cash-out or funds transfer will not be permitted for such instruments. However, the funds may be transferred ‘back to the source account’, ie, an account from where Gift PPI was loaded. This can only be done after receiving the consent of the PPI holder. Gift PPI has the option to offer interoperability.
PPIs for Mass Transit Systems
These are reloadable and the maximum value outstanding in such PPIs shall not exceed the limit of Rs. 3,000 at any point in time. These should remain exempted from interoperability. RBI in its notification dated 7th April 2021 had also increased the deposit limit for payment banks to Rs. 2 Lakh per individual customer from Rs. 1 Lakh. the limits for Prepaid instruments have also been increased from Rs.1 Lakh per individual customer to Rs. 2 Lakh per individual customer.
Requirements for achieving interoperability
This is common to wallets and cards. Where PPIs are issued in the form of wallets, interoperability across PPIs shall be enabled through UPI. Interoperability shall be mandatory on the acceptance side as well. QR codes in all modes shall be interoperable by 31st March 2022.
The interoperability shall be facilitated to all KYC- compliant PPIs and the entire acceptance infrastructure. PPI issuer must give the holders full KYC PPIs interoperability through authorized networks. This is for PPIs in the form of cards. Additionally, UPI will facilitate PPIs in the form of wallets.
Grievance redressal mechanism
As per the directive, PPI issuer shall put in place a formal publicly disclosed customer grievance redressal framework. Further, a nodal officer should handle customer complaints, the escalation matrix, and turn-around times for complaint resolution.
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