Prepaid
Payment Instruments – Banking Awareness Notes
What are PPIs?
PPIs are instruments that
facilitate purchase of goods and services, including financial services,
remittance facilities, etc., against the value stored on such instruments. PPIs
that can be issued in the country are classified under three types viz. (i)
Closed System PPIs, (ii) Semi-closed System PPIs, and (iii) Open System PPIs.
Who is an issuer of PPI?
PPI issuer is an entity
operating / participating in a payment system for issuing PPIs to individuals /
organisations. The money so collected is used by the entity to make payment to
the merchants who are part of the acceptance arrangement and for facilitating
funds transfer / remittance services.
Who is an issuer of PPI?
PPI issuer is an entity
operating / participating in a payment system for issuing PPIs to individuals /
organisations. The money so collected is used by the entity to make payment to
the merchants who are part of the acceptance arrangement and for facilitating
funds transfer / remittance services.
Who is a holder of a PPI?
A holder is an individual
/ organisation who obtains / purchases PPI from the PPI issuer and uses the
same for purchase of goods and services, including financial services,
remittance facilities, etc. However, in case of a Gift PPI, the targeted
beneficiary (though not being a purchaser) can also be a holder.
Who can issue and operate PPIs in
India?
A company incorporated in
India and registered under the Companies Act, 1956 / Companies Act, 2013 can
issue and operate PPIs after receiving authorisation from RBI.
Examples: State Bank of India, PayU, Phone
Pay, etc.,
What are various types of PPIs?
Closed System PPIs: These PPIs are issued by an entity
for facilitating the purchase of goods and services from that entity only and
do not permit cash withdrawal. As these instruments cannot be used for payments
or settlement for third party services, the issuance and operation of such
instruments is not classified as payment system requiring approval / authorisation
by the RBI.
Semi-closed System
PPIs: These PPIs are
issued by banks (approved by RBI) and non-banks (authorized by RBI) for
purchase of goods and services, including financial services, remittance
facilities, etc., at a group of clearly identified merchant locations /
establishments which have a specific contract with the issuer (or contract
through a payment aggregator / payment gateway) to accept the PPIs as payment
instruments. These instruments do not permit cash withdrawal, irrespective of whether
they are issued by banks or non-banks.
Open System PPIs: These PPIs are issued only by banks
(approved by RBI) and are used at any merchant for purchase of goods and
services, including financial services, remittance facilities, etc. Cash
withdrawal at ATMs / Points of Sale (PoS) terminals / Business Correspondents
(BCs) are also allowed through such PPIs.
How can a PPI be loaded?
PPIs can be loaded /
reloaded by cash, by debit to a bank account, by a credit / debit card, or from
other PPIs. The loading / reloading of PPIs shall be through payment
instruments issued by entities regulated in India and shall be in Indian Rupees
(INR) only. Banks and non-banks are permitted to issue and reload such payment
instruments through their authorised outlets / branches / ATMs or through their
authorised / designated agents.
Is there any limit on loading of PPIs
by cash or electronic means?
Yes, the cash loading of
PPIs is limited to ₹ 50,000/- per month subject to overall limit of the PPI.
The limit on loading of PPIs via electronic / online means is subject to
overall limit of the PPI.
Does a holder earn any interest on
PPI balances?
No interest is payable on
PPI balances.
In what form can a PPI can be issued?
The PPIs may be issued as
cards, wallets, and any such form / instrument which can be used to access the
PPI and to use the amount therein. PPIs in the form of paper vouchers shall no
longer be issued.
In what form can a PPI can be issued?
The PPIs may be issued as
cards, wallets, and any such form / instrument which can be used to access the
PPI and to use the amount therein. PPIs in the form of paper vouchers shall no
longer be issued.
What is the minimum validity period
of a PPI?
All PPIs shall have a
minimum validity period of one year from the date of last loading / reloading
in the PPI. PPI issuers are, however, free to issue PPIs with a longer
validity. Issuers shall clearly indicate the expiry period of the PPI to the
customer at the time of issuance of PPIs.
What will happen to a PPI that is not
used for a certain period?
A PPI with no financial
transaction for a consecutive period of one year shall be made / treated as
inactive after sending a notice to the PPI holder. It can be reactivated only
after validation and applicable due diligence.
Conclusion:
- The semi-closed PPIs will be
issued by the mass transit system operator (PPI-MTS) who will be
authorized under the Payment and Settlement System Act, 2007.
- The PPI-MTS will necessarily
contain the Automated Fare Collection application related to the transit
service.
- Such PPI-MTS can be used by
other merchants whose activities are allied to or are carried on within
the premises of the transit system only.
- The PPI-MTS issuer will ensure
on-boarding of merchants following due procedure applicable to any other
PPI issuer.
- The PPI-MTS will have minimum
validity of six months from the date of issue.
- The issuer may decide upon the
desired level of Know Your Customer (KYC) if any, for such PPIs.
- No cash-out or refund will be
permitted from these PPIs.
- Funds transfer under Domestic
Money Transfer (DMT) will also not be applicable to these PPIs.
