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Exploring Master Direction on Prepaid Payment Instruments (PPIs), 2021

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Master Direction on Prepaid Payment Instruments (PPIs), 2021

Master Direction on Prepaid Payment Instruments (PPIs), 2021

In the notice dated August 27, 2021, the Reserve Bank of India (RBI) issued Master Directions on Prepaid Payment Instruments (PPIs). The MD-PPIs regulations apply to all Prepaid Payment Instrument (PPI) Issuers and System Participants. PPIs are frequently issued by banks and non-bank entities after getting RBI approval/authorization under the PSS Act of 2007.

The following is the goal of this Master Direction:

  1. To establish a framework for authorising, regulating, and supervising firms that issue and operate PPIs in the state.
  2. To encourage responsible competition and innovation in this area, taking into account system and transaction security, as well as customer protection and convenience;
  3. Prepaid Payment Instruments (PPIs) must be standardised and interoperable.

PPIs are granted in the nation by banks and non-bank firms after the RBI grants the necessary approval/authorization under the Payment and Settlement Systems Act of 2007. (PSS Act). The existing instructions published on the topic have been merged and unified in these Master Directions, taking into consideration sector developments and PPI issuer progress.

The Master Direction specifies the eligibility conditions and terms of service for Payment System Operators (PSOs) in the country that issue and run PPIs.

In addition, the Master Directions on Prepaid Payment Instruments (PPIs) were published in 2021, which contained a new classification of the instruments as well as a framework for PPI entity authorization, regulation, and monitoring. In the future, no business may set up and operate payment systems for PPIs without previous RBI approval/authorization.

PPIs requiring RBI approval before issue are currently classified as follows:

  1. PPIs of a low magnitude (Minimum-detail PPI)
  • PPIs are issued by banks and non-banks once the absolute minimum of information about the Prepaid Payment Instrument holder is obtained (mobile number verified with OTP and self-declaration of name and unique identification number of Officially Valid Document).
  1. Fund transfers and cash withdrawals for the express purpose of making purchases of goods and services are banned.
  2. Used at a predefined set of merchant locations/ businesses that have a direct line of contact with the issuer.
  3. Reloadable given exclusively in electronic form (the amount loaded in a PPI during a month must not exceed Rs. 10,000/- and the total amount loaded in a PPI during the fiscal year must not exceed Rs. 1,20,000/-).
  4. At any given time, the total amount owed on such PPIs cannot exceed Rs. 10,000/-.
  5. The total amount deducted from PPIs in any one month cannot exceed Rs. 10,000/-.
  6. These Prepaid Payment Instruments must be converted into Full – KYC PPIs within 30 days after issue, otherwise no more credit will be allowed in the PPI.

Full – KYC Prepaid Payment Instrument:-

  • Issued by banks and non-banks once the PPI holder’s Know Your Customer (KYC) procedure has been completed.
  • Buying and selling goods and services, transferring payments, and withdrawing cash
  • The overdue amount may not exceed Rs. 2,00,000/- at any moment.
  • The monthly money transfer limit for pre-registered beneficiaries will be Rs. 2,00,000/- and Rs. 10,000/- for all other scenarios.

Prepaid Payment Instrument Interoperability

PPI issuers must also create a board-approved policy for PPI interoperability in addition to the aforementioned criteria. Interoperability refers to a PPI’s technological compatibility with other payment systems. On the acceptance side, interoperability will be necessary as well.


  • Interoperability for PPIs in wallet formats will be facilitated via UPI.
  • PPIs in the form of real or virtual cards must be linked to recognised card networks.

Furthermore, the RBI spared mass transit systems from Interoperability, while gifts (both banks and non-banks) have until March 31, 2022, to provide Interoperability.

Prepaid Payment Instruments as a Gift

  • These PPIs have a maximum value of Rs 10,000/- and are not reloadable.
  • No cash-outs or fund transfers are permitted, with the exception of transfers to the “source account.”

PPIs for Public Transportation Systems (PPI-MTS)

  • They must be issued by Mass Transit System Operators following approval under the PSS Act of 2007.
  • These reloadable Prepaid Payment Instruments (PPIs) have a maximum outstanding amount of Rs. 3,000/- at any particular time.

In order to issue Prepaid Payment Instruments, banks and non-banks must meet specific criteria (PPIs)

  • Banks are required to obtain RBI approval under the Payment and Settlement Systems Act of 2007.
  • They must also apply to the Agency of Payment and Settlement Systems (DPSS), Central Office (CO), Reserve Bank of India, Mumbai, within 30 days of getting such authorization, accompanied by a “NOC” from their regulatory department.

Additional restrictions apply to non-banks.

  • Any corporation formed and registered in India in accordance with the Companies Act, 1956/2013.
  • Foreign direct investment (FDI), foreign portfolio investment (FPI), and foreign institutional investment (FII) in non-banking enterprises.
  • The activity of issuing PPI must be documented in the MOA.
  • A minimum of Rs. 5 crores in positive net worth, as determined by the most recent audited balance sheet supplied with the application, as well as a certificate from a CA.
  • After receiving final permission, they must have a net worth of at least Rs. 15 crore by the end of the third fiscal year, which must be maintained at all times.

PPIs issued by both banks and non-banks are issued, loaded, and reloaded.

  • Both RBI-authorized banks and non-banks are permitted to issue both reloadable and non-reloadable PPIs.
  • Along with the PPI brand, the name of the business authorised to issue and run PPIs shall be shown, and the RBI should be notified.
  • Cash, debit to a bank account, credit and debit cards, PPIs, and other payment instruments (provided by licenced firms in India) are all legal means of loading and reloading PPIs.
  • Cash loading to PPIs is limited to Rs. 50,000/- each month, subject to the total limit of the PPI.
  • Instead of paper vouchers, PPIs may be issued in the form of cards, wallets, or any other form that permits access to the PPI and use of the cash contained inside.
  • Other PPI issuer activities’ funds (e.g., bank/s BC, payment aggregation intermediary, payment gateway, etc.) shall not be combined.

Ultimately, Prepaid Payment Instrument (PPI) firms must develop a solid, publicly published customer grievance Redressal framework, which includes appointing a nodal officer to handle customer complaints or grievances, as well as an escalation matrix and complaint resolution turnaround times. In the event of PPIs issued by banks and non-banks, customers can seek redress through the Banking Ombudsman Scheme and the Ombudsman Scheme for Digital Transactions.

Framework for customer protection and grievance redressal

While issuing the instruments, the PPI issuer must disclose all relevant terms and conditions to the holders in clear and straightforward language (ideally in English, Hindi, and the local language). 

  1. These disclosures must include all charges and costs connected with the instrument’s usage;
  2. and the expiry time and the terms and circumstances relevant to the instrument’s expiration.

PPI issuers must have a comprehensive, publicly acknowledged consumer grievance redressal structure, which includes assigning a nodal officer to address customer complaints/grievances, an escalation matrix, and complaint resolution turnaround times. If a complaint facility is made available on a website or through a mobile app, it must be clear and easy to use. The framework must incorporate, at the very least, the following:

  1. PPI issuers must disseminate information about customer protection and grievance redressal policies in plain language (preferably in English, Hindi and the local language).
  2. On the website, mobile wallet applications, and cards, the PPI issuer must clearly provide the customer care contact data, including nodal officials for grievance redressal (telephone numbers, email addresses, postal addresses, and so on).
  3. PPI issuer’s agents must show suitable signs identifying the PPI Issuer and providing customer care contact information, as specified in (b) above.
  4. The PPI issuer must offer particular complaint numbers for complaints submitted, as well as the ability for the client to follow the status of the complaint.
  5. PPI issuers must take steps to settle any consumer complaint or grievance as soon as possible, ideally within 48 hours, and no later than 30 days from the date of receipt of such complaint or grievance.
  6. The PPI issuer must publish a complete list of its authorised / designated agents (name, agent ID, address, contact information, and so on) on its website / mobile app.


MD-PPI provisions apply to all Prepaid Payment Instrument (PPI) Issuers and System Participants. The following are the instructions’ purposes. To provide a framework for the authorization, regulation, and oversight of companies that issue and operate PPIs in the nation. To stimulate competition and encourage innovation in this area in a responsible way, while taking into consideration system and transaction safety and security, as well as client protection and convenience. To ensure PPI standardisation and interoperability.

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