RBI Reporting Requirements and Compliances for Prepaid Payment Instruments (PPIs) in India

Contributed By: Prerana Jain
Email: Prerana@simplybiz.in

Definition and Overview

Prepaid Payment Instruments (PPIs) are instruments that facilitate purchase of goods and services, including financial services, remittance facilities, etc., against the value stored on such instruments. The value stored represents the amount paid by the holder, by cash, debit to a bank account, or by credit card.

PPIs can be issued by banks and non-banks. Banks can issue PPIs after obtaining approval from RBI. The non-bank PPI issuers are companies incorporated in India and registered under the Companies Act, 1956 / 2013. They can operate a payment system for issuing PPIs to individuals / organisations after receiving authorisation from RBI.

The RBI Master Directions 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.

 No entity can set up and operate payment systems for PPIs without prior approval / authorisation of RBI.

Important Definitions:

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.

Holder: Individuals / Organisations who obtain / purchase PPIs from the issuer and use them for purchase of goods and services, financial services, remittance facilities, etc.

Issuer: Entities issuing PPIs to individuals / organisations.

PPI Issuer – Banks

• Approval from RBI
• Apply to the Department of Payment and Settlement Systems (DPSS), Central Office (CO), RBI, Mumbai along with a ‘No Objection Certificate’ from their regulatory department, within 30 days of obtaining such clearance.

PPI Issuer – Non-banks – Eligibility criteria & Reporting

• Approval form RBI
• Apply to the Department of Payment and Settlement Systems (DPSS), Central Office (CO), RBI, Mumbai along with a ‘No Objection Certificate’ from their regulatory department, within 30 days of obtaining such clearance.
• Authorization under MOA of the Company to take up such activity.
• Net-worth – minimum positive net-worth of Rs.5 crore as per the latest audited balance sheet at the time of submitting the application. Thereafter, by the end of the third financial year from the date of receiving final authorisation, they shall achieve a minimum positive net-worth of Rs.15 crore which shall be maintained at all times.
• Submit an annual net-worth certificate from a Chartered Accountant within six months of financial year-end.

Types of PPI issuers in India: (refer para 9 of the master direction)

1. Small PPIs: Issued by banks and non-banks after obtaining minimum details of the PPI holder. They shall be used only for purchase of goods and services. Funds transfer or cash withdrawal from such PPIs shall not be permitted. Small PPIs can be used 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.

• Cash loaded up to ₹10,000 per month, subject to an overall cap of ₹1,20,000 in a financial year.
• Reloadable, but only via bank account, credit card, or full-KYC PPI (not via cash after initial load).
• For purchase of goods and services only (not permitted for fund transfer or cash withdrawal).
• Valid for a maximum of 24 months from issue date (non-reloadable versions).

2. Full-KYC PPIs: Issued by banks and non-banks after completing Know Your Customer (KYC) of the PPI holder. These PPIs shall be used for purchase of goods and services, funds transfer or cash withdrawal.

• Such PPIs shall be reloadable in nature;
• The amount outstanding shall not exceed Rs.2,00,000/- at any point of time.

In addition to the categories mentioned earlier, PPIs also include two special types:

1. Gift PPIs

• The maximum value of each gift instrument is capped at ₹10,000.
• They are non-reloadable.
• Cash withdrawal and fund transfers are not permitted. However, subject to the PPI holder’s consent, the balance can be transferred back to the original funding account.
• These instruments must be revalidated (including issuance of a new one, if required) whenever the PPI holder requests.
• Two-Factor Authentication (2FA) / Additional Factor of Authentication (AFA) is not mandatory for Gift PPI transactions.

2. PPIs for Mass Transit Systems (PPI-MTS)

• Issued specifically by mass transit operators.
• Usable only within the transit ecosystem, i.e., for the transit system itself and at allied or associated merchants located within the transit premises.
• These are reloadable
• The maximum permissible outstanding balance at any time is ₹3,000.
• Cash withdrawal, refunds, and fund transfers are not allowed.
• Similar to Gift PPIs, these instruments must also be revalidated upon request of the holder.
• 2FA / AFA is not required for transactions made using PPI-MTS.

3. PPIs for Foreign Nationals / NRIs Visiting India

• Authorized banks and non-bank PPI issuers are permitted to issue INR-denominated, full-KYC PPIs to foreign nationals and NRIs visiting India. Initially, this facility is being extended to travelers from G-20 countries arriving at selected international airports. These PPIs may also be offered under co-branding arrangements with entities authorized to deal in foreign exchange under FEMA.
• Issuance is subject to physical verification of the customer’s passport and visa at the point of onboarding, and the issuer must maintain proper records of such verification.
• These PPIs may be provided as wallets linked to UPI, but can be used strictly for merchant transactions (P2M).
• Loading and reloading is allowed only against receipt of foreign exchange, whether in cash or through another payment instrument. The currency conversion into INR can be carried out solely by entities licensed to deal in foreign exchange under FEMA.
• The maximum balance allowed in such instruments will be the same as that applicable for full-KYC PPIs.

Interoperability

Interoperability refers to the ability of different payment systems to work seamlessly with one another, allowing a PPI to be used across multiple platforms.

PPI issuers must comply with the technical standards, specifications, and requirements prescribed for enabling interoperability through UPI and card networks. The National Payments Corporation of India (NPCI) and the respective card networks will provide the necessary framework and support to ensure participation of PPI issuers in these systems.

Every PPI issuer is required to put in place a Board-approved policy that outlines the approach and framework for implementing interoperability.

RBI Reporting Requirements and Compliances for PPI Licensed Companies in India

Below is a detailed table of all mandatory reports and compliances for PPI issuers under RBI regulations, including timelines, mode/format, submission authority, and clickable source links.

PPIs have emerged as a key enabler of India’s digital payments ecosystem, providing convenience, security, and inclusivity. With continuous regulatory refinements and the integration of technology, PPIs are poised to play an even greater role in driving financial access and supporting the country’s vision of a less-cash economy.

Ref:

Master Directions: https://www.rbi.org.in/scripts/bs_viewmasdirections.aspx?id=12156

RBI FAQs’ on PPI: https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=2812