RBI has announced a change in policy for full-KYC Prepaid Payment Instruments (“PPIs”). The changes are aimed at accelerating and incentivising interoperability between PPIs issued by banks and non-banks by an update to the Master Directions on Prepaid Payment Instruments^[1] (“Master Directions”).

The Master Directions classify PPI in two categories – small PPIs and full-KYC PPIs. Small PPIs are issued by banks and non-banks after obtaining minimum details of the PPI holder. Full-KYC PPIs are issued by banks and non-banks after completing Know Your Customer (KYC) of the PPI holder.

The important changes to the Master Directions are set out below:

1. Interoperability. The most significant of the changes introduced was the mandatory requirement for PPI issuers to provide interoperability to the holders of KYC-compliant PPIs starting from March 31, 2022 (formerly introduced in 2018 as optional^[2]). This interoperability will be enabled through authorised card networks (applicable to card-based PPIs), or the Unified Payment Interface (“UPI”) (for electronic wallet-based PPIs). In essence, this interoperability will enable PPI issuers, System Providers and System Participants in different systems to undertake, clear and settle payment transactions across systems.^[3]
2. Increasing the Limit for full-KYC PPIs. The changes have also increased the maximum value from INR 1,00,000 to INR 2,00,000 with respect to full-KYC PPIs.
3. Cash Withdrawal Permit. Cash withdrawal facility for full-KYC compliant PPIs issued by non-bank PPI issuers has been permitted (previously restricted only for PPIs issued by banks and through ATMs and PoS terminals). The facility is limited to INR 2,000 per transaction and an overall limit of INR 10,000 per month and other applicable conditions. The issuer is required to establish a proper customer redressal mechanism and suitable cooling period for cash withdrawal, upon opening or loading/reloading funds into such PPIs in order to mitigate the risk of fraud.

The stated purpose of the changes to cash withdrawals is to promote optimal utilisation of payment instruments (such as cards and wallets) and push for the integration of such infrastructure in Tier III to Tier VI regions.^[4]

---

[1] See Master Direction on Prepaid Payment Instruments (PPIs) [Available at: https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12156]

[2] See RBI Guidelines dated Oct 16, 2018 [Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11393]

[3] For a better understanding on “Interoperability” in the context of PPIs, see paragraph 11 of the Master Direction on Prepaid Payment Instruments (PPIs) [Available at: https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12156]. See also, para. 1.1 of the RBI Guidelines dated Oct 16, 2018 [Available at: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11393]

[4] See RBI Press Release dated April 7, 2021 [Available at: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=51382]