PAYMENT AND SETTLEMENT SYSTEMS

Payment and settlement systems play an important role in improving overall economic efficiency. They consist of all the diverse arrangements that we use to systematically transfer money-currency, paper instruments such as cheques, and various electronic channels.


Prepaid Payment Instruments (PPIs)

(Updated as on May 03, 2019)

1. Under what powers has the Reserve Bank of India (RBI) issued the Master Direction (MD) on Issuance and Operations of Prepaid Payment Instruments (PPIs)?

Ans. In exercise of the powers conferred under Section 18 read with Section 10(2) of the PSS Act, 2007, RBI has issued these Directions.

2. Who can issue and operate PPIs in India?

Ans. 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.

3. How many PPI issuers have been approved by RBI? Where can I find the list of authorised bank and non-bank PPI issuers?

Ans. The list is available on the RBI website at the link https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=12043 and https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2491.

4. What are PPIs?

Ans. 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.

5. Who is an issuer of PPI?

Ans. 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.

6. Who is a holder of a PPI?

Ans. 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.

7. What are various types of PPIs?

Ans. 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.

8. Does a holder earn any interest on PPI balances?

Ans. No interest is payable on PPI balances.

9. How can a PPI be loaded?

Ans. 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.

10. Is there any limit on loading of PPIs by cash or electronic means?

Ans. 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.

11. In what form can a PPI can be issued?

Ans. 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.

12. In what form prepaid meal instruments can be issued? Are they allowed to be reloaded?

Ans. Like any PPI, prepaid meal instruments may be issued as cards, wallets, and in any such form or instrument (except in the form of paper vouchers) which can be used to access the PPI and to use the amount therein. Prepaid meal instruments can be issued only as semi-closed PPIs without cash withdrawal and funds transfer.

13. Can a remitter create new PPIs for each cash based remittance?

Ans. PPI issuers, including their agents, shall not create new PPIs each time, for facilitating cash-based remittances to other PPIs / bank accounts. PPIs created for previous remittance by the same person shall be used.

14. Can co-branded PPIs be issued?

Ans. Yes. PPIs can be issued on solo basis by a PPI issuer or on co-branded basis with another entity.

15. Who can be a co-branding partner of the PPI Issuer?

Ans. The co-branding partner shall be a company incorporated in India and registered under the Companies Act, 1956 / Companies Act, 2013. In case the co-branding partner is a bank, then the same shall be a bank licensed by RBI. In case of co-branding arrangement between a bank and a non-bank entity, the bank shall be the PPI Issuer. In case both the entities are non-banks, one of them will be pre-assigned, in advance, the role of issuer among themselves.

16. In case of a co-branded card, who will be responsible for addressing all customer service aspects?

Ans. Between the two partners, one will be designated as a PPI issuer who shall be responsible for addressing all customer service aspects relating to the co-branded PPI.

17. Can PPIs be used for cross-border outward transactions? What are transaction limits and the transactions that are allowed under it?

Ans. KYC compliant reloadable semi-closed and open system PPIs, issued by Authorised Dealer Category-I banks, shall be permitted to be used in cross-border outward transactions for permissible current account transactions under FEMA viz. purchase of goods and services. This facility shall be enabled only on explicit request of a PPI holder.

Transaction Limits:

Per transaction limit shall not exceed ₹ 10,000/-.
Per month limit shall not exceed ₹ 50,000/-.

Transactions allowed:

Permissible current account transactions under Foreign Exchange Management Act (FEMA) viz. purchase of goods and services, subject to adherence to extant norms governing such transactions.

Transactions not-allowed:

  1. Any cross-border outward fund transfer and / or for making remittances under the Liberalised Remittances Scheme.

  2. Prefunding of online merchant’s account.

18. Can PPIs be used for cross-border inward transactions? What are the transaction limits?

Ans. Banks and non-bank PPI issuers, who are Indian agents of the authorised Overseas Principal (OP), are permitted to issue KYC compliant PPIs to beneficiaries of inward remittance under the Money Transfer Service Scheme (MTSS) of the RBI. It means that the entity undertaking this activity needs to be an authorised PPI issuer as well as an Indian Agent under MTSS (authorised by Foreign Exchange Department, RBI).

Amounts up to ₹ 50,000/- from individual inward MTSS remittances are permitted to be loaded or reloaded in PPIs issued to beneficiaries. Any single transaction amount in excess of ₹ 50,000/- shall be paid by credit to a bank account.

19. I am receiving a cross-border inward remittance of ₹ 75,000/-. Can ₹ 50,000/- be credited in PPI and the remaining in bank account?

Ans. No, splitting of credit is not permitted when funds are loaded in PPIs. Since the amount of transaction is more than ₹ 50,000/-, the entire amount has to be credited to bank account.

20. What are the types of Semi-closed PPIs?

Ans. Semi-closed PPIs can be of two types:

  1. PPIs upto ₹ 10,000/- where minimum details of the PPI holder are obtained (minimum detail PPI).

  2. PPIs upto ₹ 1,00,000/- where KYC of the PPI holder is obtained (KYC compliant PPI).

21. What is meant by the word KYC mentioned in the PPI-Master Direction dated October 17 2017 (PPI-MD) at different places like paragraph numbers 7.14, 8.1 (a), 8.2 (c), 9.1 (k), 10.1 (d), etc.?

Ans. The meaning of KYC is as defined in paragraph 6 of the PPI-MD.

22. What is included in minimum details to be obtained in a ‘minimum detail PPI’?

Ans. The minimum details shall include mobile number verified with an One Time Pin (OTP) and self-declaration of name and unique identification number of either any of the ‘Officially Valid Document (OVD)’ defined under Rule 2(d) of the PML Rules, 2005, or any of the mandatory documents, as applicable, under the PML Rules, 2005.

23. What are salient features of ‘minimum detail PPI’?

Ans. The salient features of ‘minimum detail PPI’ are as follows:

  1. These PPIs are reloadable in nature.

  2. The amount loaded during any month shall not exceed ₹ 10,000/- and the total amount loaded during the financial year shall not exceed ₹ 1,00,000/-.

  3. The amount outstanding at any point of time shall not exceed ₹ 10,000/-.

  4. The total amount debited during any given month shall not exceed ₹ 10,000/-.

  5. These PPIs shall be used only for purchase of goods and services. Funds transfer to bank accounts or PPIs of same / other issuers shall not be permitted.

24. Can anyone do funds transfer from a ‘minimum detail PPI’?

Ans. Funds transfer from a ‘minimum detail PPI’ to bank accounts or to PPIs of same / other issuers shall not be permitted.

25. How long can a customer hold a ‘minimum detail PPI’? What will happen to the balance after expiry of stipulated time?

Ans. A ‘minimum detail PPI’ can be held for a maximum period of 18 months only. These 18 months shall be counted from the day of opening of such a PPI. Within this period of 18 months, it has to be converted into KYC compliant PPIs failing which, no further credit in such PPI shall be allowed. However, the PPI holder shall be allowed to use the available balance. All such PPIs existing as on February 28, 2018 shall be converted into KYC compliant PPIs by August 31, 2019.

26. Can a closed ‘minimum detail PPI’ be reopened after exhausting the maximum time limit of 18 months?

Ans. Reissue of such PPIs using the same mobile number and same minimum details is not allowed.

27. What happens to outstanding balance if the ‘minimum detail PPI’ is not required anymore and has to be closed?

Ans. PPI holder has the option to close the PPI at any time and transfer the outstanding balance to his / her ‘own bank account’ after complying with KYC requirements. The account to which the closure proceeds are to be transferred has to be ‘duly verified by the PPI Issuer’ before allowing such transfer. PPI holder can also transfer the funds ‘back to source’ (source of payment from where the PPI was loaded) at the time of closure.

28. What is meant by ‘duly verified by the issuer’? How can the PPI issuer be sure that it is the ‘own bank account of the PPI holder’?

Ans. PPI issuer is responsible for verifying that the bank account pertains to the PPI holder for which it may devise suitable methods of verification.

29. What are salient features of a semi-closed ‘KYC compliant PPI’?

Ans. The salient features of semi-closed ‘KYC compliant PPI’ are as follows:

  1. These PPIs shall be reloadable in nature.

  2. The amount outstanding shall not exceed ₹ 1,00,000/- at any point of time. However, there are no limits prescribed for total credits or debits during a month.

  3. They can be used for purchase of goods and services as well as funds transfer.

30. Is fund transfer allowed from a semi-closed ‘KYC Complaint PPI’?

Ans. Yes, funds transfer is allowed from a ‘KYC Complaint PPI’ within a limit of ₹ 10,000/- per month per holder. However, an enhanced limit of up to ₹ 1,00,000/- per month per beneficiary can be availed if the beneficiary is ‘pre-registered’ by PPI holder. A PPI issuer may, however, set a lower limit after taking into account the risk profile of the PPI holder, other operational risks, etc.

31. Can a PPI holder close the ‘KYC compliant PPI’? If yes, what will happen to the outstanding amount?

Ans. PPI issuers shall give an option to the PPI holders to close the PPI and transfer the balance to bank account as per the applicable limits of this type of PPI. For this purpose, the Issuer shall provide an option at the time of issuing the PPI, to the holder to provide details of pre-designated bank account or other PPI to which the balance amount available in the PPI shall be transferred in the event of closure of PPI, expiry of validity period of such PPIs, etc. At the time of closure, a holder can specify a bank account which is different from pre-designated account given earlier.

32. What are the types of Open System PPIs?

Ans. Open System PPIs can be issued only by banks, who have RBI approval to issue such PPIs. There is only one type of open system PPI i.e. PPI upto ₹1,00,000/- after completing KYC of the PPI holder (KYC compliant PPI).

33. What are the features of Open System PPIs?

Ans. The salient features of Open System PPIs are as follows:

  1. They are reloadable in nature.

  2. The amount outstanding in such a PPI shall not exceed ₹1,00,000/- at any point of time.

  3. They can be used for purchase of goods and services, funds transfer and cash withdrawal.

34. Is there a requirement of explicit customer consent for each transaction using a PPI?

Ans. Every successive payment transaction using a PPI has to be authenticated by explicit customer consent. Similarly, the PPIs issued in the form of cards (physical or virtual) shall necessarily have an Additional Factor of Authentication (AFA) as required for debit cards, except in case of PPIs issued under PPI-MTS.

35. What are salient features of a Gift Instrument?

Ans. The salient features of prepaid gift instruments are as follows:

  1. Maximum value of each such prepaid gift instrument shall not exceed ₹ 10,000/-.

  2. These instruments shall not be reloadable.

  3. Cash-out or refund or funds transfer shall not be permitted for such instruments.

  4. The gift instruments may be revalidated (including through issuance of new instrument) as per the Board approved policy of the issuer.

36. What are salient features of PPIs for Mass Transit Systems (PPI-MTS)?

Ans. The salient features of PPIs for Mass Transit Systems (PPI-MTS) are as follows:

  1. These are semi-closed PPIs issued by mass transit system operators.

  2. Apart from the mass transit system, such PPI-MTS can be used only at other merchants whose activities are allied / related to or are carried on within the premises of the transit system.

  3. They can be reloadable in nature.

  4. Maximum outstanding cannot exceed the limit of ₹ 3,000/- at any point of time.

  5. Cash-out or refund or funds transfer are not permitted.

  6. They can be revalidated (including through issuance of new instrument) as per the Board approved policy of the issuer.

  7. There is no need of AFA for transactions using such PPIs.

37. I was given an option to convert my PPI into the new categories allowed in the PPI-MD, however, I have not exercised the option. What will happen to my PPI and balance thereof?

Ans. Where a PPI holder has not exercised the option of converting into any of the new categories, the PPIs issued to his / her shall mandatorily be converted into a minimum detail PPI with all the applicable features as on March 01, 2018. While the PPI holder shall be allowed to use the existing balance for purchase of goods and services, no further credit / loading shall be allowed till the minimum details are obtained.

38. What is the minimum validity period of a PPI?

Ans. 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.

39. What will happen to a PPI that is not used for a certain period?

Ans. 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.

40. What will happen to the outstanding balance in such PPIs where the scheme is being wound-up or are directed by RBI to be discontinued?

Ans. The holders of such PPIs shall be permitted to redeem the outstanding balance in the PPI, if for any reason the scheme is being wound-up or is directed by RBI to be discontinued.

41. How the refunds in case of failed / returned / rejected / cancelled transactions shall be dealt with?

Ans. Refunds in case of failed / returned / rejected / cancelled transactions shall be applied to the respective PPI immediately, to the extent that payment was made initially by debit to the PPI, even if such application of funds results in exceeding the limits prescribed for that type / category of PPI.

42. Can refunds in case of failed / returned / rejected / cancelled transactions using any other payment instrument be credited to a PPI?

Ans. Refunds in case of failed / returned / rejected / cancelled transactions using any other payment instrument should not be credited to a PPI and should be credited back to the same payment instrument.

43. What are the disclosures to be made by the PPI issuer at the time of issuance?

Ans. PPI issuers shall disclose all important terms and conditions in clear and simple language to the holders while issuing the instruments. These disclosures shall include:

  1. All charges and fees associated with the use of the instrument.

  2. The expiry period and the terms and conditions pertaining to expiration of the instrument.

44. What is the grievance redressal set-up prescribed for a PPI Issuer?

Ans. PPI issuers shall put in place a formal, publicly disclosed customer grievance redressal framework, including designating a nodal officer to handle the customer complaints / grievances, the escalation matrix and turn-around-time for complaint resolution. The framework shall include, at the minimum, the following:

  1. Dissemination of the information of customer protection and grievance redressal policy of the PPI issuer in simple language.

  2. Clear indication of the customer care contact details of the PPI issuer, including details of nodal official for grievance redressal on website, mobile apps, and cards.

  3. Display of proper signage by the agents of the PPI Issuer and the customer care contact details as at (b) above.

  4. Providing specific complaint numbers for the complaints lodged along with the facility to track the status of the complaint by the customer.

  5. Initiating action to resolve any customer complaint / grievance expeditiously, preferably within 48 hours and resolve the same not later than 30 days from the date of receipt of such complaint / grievance.

  6. Display the detailed list of the authorized / designated agents (name, agent ID, address, contact details, etc.) of the PPI issuer on the website / mobile app.

  7. Also provide answers to Frequently Asked Questions (FAQs) on the website / mobile app related to the PPIs.

45. What is the protection available in case of unauthorized / fraudulent transactions involving PPIs?

Ans. Non-bank PPI issuers shall clearly outline the amount and process of determining customer liability in case of unauthorised / fraudulent transactions involving PPIs. Bank PPI issuers shall be guided by the Department of Banking Regulation, circular DBR.No.Leg.BC.78/09.07.005/2017-18 dated July 6, 2017 on Customer Protection – Limiting Liability of Customers in Unauthorised Electronic Banking Transactions.

46. Is there any instruction on providing account statement or transaction history of PPI transactions?

Ans. PPI issuers shall provide an option for the PPI holders to generate / receive account statements for at least past 6 months. The account statement shall, at the minimum, provide details such as date of transaction, debit / credit amount, net balance and description of transaction. Additionally, the PPI issuers shall provide transaction history for at least 10 transactions.

47. Is the Banking Ombudsman Scheme applicable for PPI transactions?

Ans. In case of PPIs issued by banks, customers have recourse to the Banking Ombudsman (BO) Scheme. RBI is in process of extending the scope of BO Scheme to non-bank PPIs also.

48. Can a PPI issuer issue multiple PPIs to same customer?

Ans. A PPI issuer can issue any one of the following two types to a customer:

  1. Minimum detail semi-closed PPI;

  2. KYC compliant semi-closed / open system PPI;

49. Within the types mentioned above, in case a PPI issuer is issuing multiple PPIs to same customer due to reasons like multiple co-branding partners; various forms like wallet and card; etc. how will the limits be treated?

Ans. Within the types mentioned above, in case a PPI issuer is issuing multiple PPIs to same customer due to various reasons (e.g. multiple co-branding partners, issuance of PPI in different form factors like wallets / cards), then the PPI issuer shall monitor the limits through centralised database / management information system (MIS).

For example, the limit of ₹1,00,000/- at any point of time shall be calculated after combining the value in all KYC compliant PPIs issued to a customer by a particular PPI issuer under various arrangements / form factor.

Similarly, the limit of ₹10,000 in paragraph 9.1(i) of PPI MD is across all minimum detail PPIs (issued by the PPI issuer under various arrangements / form factor).

However, the limits does not include the two categories [Gift instruments and PPIs for Mass Transit Systems (PPI-MTS)] mentioned in paragraph 10 of the PPI-MD.

50. What is meant by interoperability of PPIs? Are PPIs Interoperable?

Ans. Interoperability is the technical compatibility that enables a payment system to be used in conjunction with other payment systems. Interoperability allows PPI issuers, system providers and system participants in different systems to undertake, clear and settle payment transactions across systems without participating in multiple systems. Interoperability has been allowed in PPIs through circular DPSS.CO.PD.No.808/02.14.006/2018-19 dated October 16, 2018. Desirous PPI issuers can provide this facility to the customers.

51. Who can provide the facility of PPI interoperability?

Ans. Any authorised bank or non-bank PPI issuer can provide the facility of PPI interoperability.

52. Is it mandatory for a PPI issuer to allow interoperability?

Ans. No, it is not mandatory for a PPI issuer to allow interoperability. However, if opted for by an issuer, it shall be facilitated to all KYC compliant PPI accounts and entire acceptance infrastructure.

53. I am having a minimum detail PPI but my issuer is not allowing interoperability. Why?

Ans. Interoperability is allowed only for KYC compliant PPIs.

54. What are the modes of interoperability?

Ans. If the PPI is issued in the form of wallet, interoperability across PPIs shall be enabled through UPI. If the PPI is issued in the form of card, the card shall be affiliated to the authorised card network for interoperability.

These FAQs are issued by the Reserve Bank of India for information and general guidance purposes only. The Bank will not be held responsible for actions taken and/or decisions made on the basis of the same. For clarifications or interpretations, if any, one may be guided by the relevant circulars and notifications issued from time to time by the Bank.

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