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SPEEDY Railway Book (English)

Pre-Paid Payment Instrument in India

Pre-Paid Payment Instrument in India

Pre-Paid Payment Instrument - An overview

Prepaid payment instruments are methods that expedite purchase of goods and services against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holder, by cash, by debit to a bank account, or by credit card.
The Payment and Settlement System(PSS) Act, 2007 under which Reserve bank of India given the authority on the issuance of 'Pre-Paid Payment Instrument' received the assent of the President on 20th December 2007 and it came into force with effect from 12th August 2008. Under the provision of Payment and Settlement Systems Act, 2007,RBI issued guidelines on 29th April, 2009 under Section 18 and additional guidelines in November 2010. 

Form of PPI – 
These can be issued as smart cards, mobile accounts, magnetic stripe cards, mobile wallets, internet accounts, internet wallets, paper vouchers and any device that can be used to access prepaid quantities. 

Eligibility to issue PPI: 
All types of PPIs that can comply with the bench-marking criteria can be issued. NBFCs and others can issue only semi-closed system payment instruments. 
A).Capital requirements to be eligible – 
Banks and NBFC may issue pre-payment payment instruments to comply with the requirement of revenue capital fixed by the Reserve Bank of India. 
Other people have a minute up-to-date capital of 100 million and positive net-owned funds. 
B).KYC/ AML/ CFT provisions – 
The RBI KYC guidelines shall apply. 
Maximum price of a prepaid payment instrument (where fixed limit is not determined) Rs. 50, 000.
Pre-paid payment instruments cannot be used for cross-border transactions. 

Instruments that can be issued: 
  • Categorization and value limits of PPIs – 
  • The previous 5 categories of semi-closed PPIs have been replaced with 3 broad categories on 1st October, 2012 as under – 
  • Semi-closed system PPI s can be issued in electronic form inly up to Rs. 10, 000 by accepting minimum details of customer if the outstanding amount does not exceed Rs. 10, 000 and the total price of the reload in any month is also Rs. 10, 000. 
  • Semi-closed system PPIs can be issued from Rs. 10, 001 to Rs. 50, 000 by accepting any officially valid document defined under Prevention of Money Laundering Act. It can be an electronic form and nature should be non-re-loadable. 
  • Semi-closed system PPIs can be issued up to Rs. 50, 000 with full KYC and can be re-loadable. 
Escrow Management: 
  • Reserve Bank of India has advised that the issuer / agent / distributor will sell a PPI when the end-user account will be credited immediately. Further, the balance of escrow account will have outstanding balance on PPI and users at any time will be sufficient to make the dealer out of the use of PPI. 
  • Non-bank companies of PPI have to maintain outstanding infrastructure in any scheduled commercial bank's escrow account. 
Validity period of PPI: 
  • In order for the payment instrument to expire, after the advance of caution in advance at least 15 days before the holder, the balance can be confiscated against a payment instrument. 
  • All the instruments issued by the country will have minimum validity of six (6) months [1 year for gift instruments] from the date of activation to the holder.
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