RBI Norms on Prepaid Payment Instruments for E-Wallets
In an effort to promote digital transactions, The Reserve Bank released guidelines to facilitate payments among different mobile wallets, in 2018. RBI issued these consolidated guidelines to enable 3 different phases in order to prepare better for the implementation of interoperability.
Interoperability of PPI
Interoperability is the technical compatibility that allows a payment system to be used in conjunction with other payment systems. It allows Prepaid Payment Instrument (PPI) issuers, participants, and providers in different systems to undertake payment transactions, without having to participate in multiple systems.
Before the PPI standards were put in place, a mobile wallet user couldn’t make a payment from his wallet to one run by a rival firm. However, after the Prepaid payment instruments was implemented, users were able to transfer funds between wallets and also from their wallets to bank accounts.
The Three-Phase Implementation
Before The RBI released these guidelines in 2018, interoperability of all KYC-compliant Prepaid Payment Instruments was to be enabled in three phases. These phases included:
- Interoperability of PPIs issued in the form of wallets through UPI (Unified Payments Interface).
- Interoperability between wallets and bank accounts through UPI.
- Interoperability issued in the form of cards through card networks.
So now, if a merchant has signed up for one wallet with full KYC (Know Your Customer), he does not require signing up for others and he can receive payments from any wallet.
The new RBI mandate on PPI
Since PPIs have been playing an important role in promoting digital payments, a new type of PPI has been introduced, which can be used only for the purchase of goods and services up to a limit of Rs 10,000. The loading of such PPI will be from a bank account and used for making only digital payments like bills, merchant payments, etc. This new Prepaid payment instruments can be issued on the basis of essential minimum details sourced from the customer.
RBI Rules for such PPIs state that
- Banks and non-banks can issue semi-closed PPIs for up to Rs 10,000 after obtaining minimum details of the PPI holder.
- These details include mobile number verified with OTP (One Time Pin) and self-declaration of name and Unique Identification Number of any of the ‘officially valid documents’.
- The amount loaded in such PPIs in any month cannot exceed Rs. 10,000 and the total amount loaded during the financial year cannot exceed Rs. 1,00,000.
- The amount outstanding at any point in time cannot exceed Rs. 10,000.
- The total amount debited from such PPIs during any given month cannot exceed Rs. 10,000.
- These PPIs can be used only for the purchase of goods and services. Funds transfer from such PPIs to bank accounts and also to PPIs of the same/other issuers will not be permitted.
- PPI issuers must ensure that this category of Prepaid payment instruments is not issued to the same user in the future using the same mobile number and the same minimum details.
How rules on interoperability impacted E-wallet Companies?
After the interoperability was rolled out completely in 2018, e-wallets were on a par with payment banks. It opened up a new window for wallet companies to explore new business opportunities. The Prepaid payment instruments industry waited quite long for these guidelines and the new rules made the industry more lucrative for new companies to join.
Impact on Users
Today, mobile wallet users can transfer funds from one wallet to the other, effortlessly, without having to download another wallet. They can pay across different networks of any other Prepaid payment instruments through UPI. Once the users have done their KYC with the wallet companies, they can avail of the benefits of interoperability.
