August 27, 2021
All Prepaid Payment Instrument Issuers (Banks and Non-banks) and System Participants
Madam / Dear Sir,
This has reference to the Master Direction dated October 11, 2017 on Issuance and Operation of Prepaid Payment Instruments (PPI-MD) and subsequent amendments made thereto. Keeping in view the recent updates to PPI guidelines, it has been decided to issue the Master Directions afresh.
2. These Directions are issued under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007.
Yours faithfully,
(P. Vasudevan)
Chief General Manager
Master Directions on Prepaid Payment Instruments (MD-PPIs)
1. Introduction
1.1 In exercise of the powers conferred under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007), the Reserve Bank of India (RBI) being satisfied that it is necessary and expedient in the public interest to do so, hereby, issues these Directions.
1.2 Short title and commencement
a) These Directions shall be called the Reserve Bank of India Master Directions on Prepaid Payment Instruments, 2021 (MD-PPIs, 2021); and
b) These Directions shall come into effect from the date they are placed on RBI website. However, in respect of instructions already issued, they shall be effective as per the respective timelines prescribed.
1.3 Applicability: The provisions of MD-PPIs shall apply to all Prepaid Payment Instrument (PPI) Issuers and System Participants.
1.4 Purpose
a) To provide a framework for authorisation, regulation and supervision of entities issuing and operating PPIs in the country;
b) To foster competition and encourage innovation in this segment in a prudent manner while taking into account safety and security of systems and transactions along with customer protection and convenience; and
c) To provide for harmonisation and interoperability of PPIs.
1.5 Banks and non-bank entities issue PPIs in the country after obtaining necessary approval / authorisation from RBI under the Payment and Settlement Systems Act, 2007 (PSS Act). Taking into account the developments in the field and the progress made by PPI issuer, the existing instructions issued on the subject till date have been incorporated and are consolidated in these Master Directions (MD).
1.6 The MD lays down the eligibility criteria and the conditions of use for Payment System Operators (PSOs) involved in the issuance and operation of PPIs in the country.
1.7 No entity can set up and operate payment systems for PPIs without prior approval / authorisation of RBI.
2. Definitions
For the purpose of this MD, the following definitions shall be applicable:
2.1 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. These instruments cannot be used for payment or settlement for third party services. The issuance or operation of such instruments is not classified as a payment system requiring approval / authorisation by RBI and are, therefore, not regulated or supervised by RBI.
2.2 Entities / Entity : The term ‘entities / entity’ refer/s to banks / non-banks who have approval / authorisation from RBI to issue PPIs as well as those who are proposing to issue PPIs.
2.3 Holder : Individuals / Organisations who obtain / purchase PPIs from the issuer and use them for purchase of goods and services, financial services, remittance facilities, etc.
2.4 Issuer : Entities issuing PPIs to individuals / organisations.
2.5 Limits : All limits in the value of instruments stated in this MD, indicate the maximum value of such instruments denominated in INR that shall be issued.
2.6 Merchants : Establishments who have a specific contract to accept the PPIs of the PPI issuer (or contract through a payment aggregator / payment gateway) against the sale of goods and services, financial services, etc.
2.7 Net-worth : Shall consist of ‘paid up equity capital, preference shares which are compulsorily convertible into equity capital, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of assets but not reserves created by revaluation of assets’ adjusted for ‘accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any’. While compulsorily convertible preference shares reckoned for computation of net-worth can be either noncumulative or cumulative, these shall be compulsorily convertible into equity shares and the shareholder agreements shall specifically prohibit any withdrawal of this preference share capital at any time.
2.8 Prepaid Payment Instruments (PPIs)1 : Instruments that facilitate purchase of goods and services, financial services, remittance facilities, etc., against the value stored therein. PPIs that require RBI approval / authorisation prior to issuance are classified under two types viz. (i) Small PPIs, and (ii) Full-KYC PPIs.
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