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PRE-PAID PAYMENT INSTRUMENTS

INTRODUCTION

Prepaid Payment Instruments are those which facilitate 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 Prepaid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, online wallets, mobile accounts, mobile wallets, paper vouchers and any such instruments which can be used to access the prepaid amount.

Persons proposing to operate payment systems and involved in the issuance of Pre-paid Payment Instruments shall seek authorization from the Department of Payment and Settlement Systems, Reserve Bank of India,

The pre-paid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts, mobile wallets, paper vouchers and any such instrument which can be used to access the pre-paid amount

CATEGORIZATION

The pre-paid payment instruments that can be issued in the country are classified under three categories viz.

(i) Closed system payment instruments

(ii) Semi-closed system payment instruments and

(iii) Open system payment instruments.

Closed System Payment Instruments: These are payment instruments issued by a person for facilitating the purchase of goods and services from him/it. These instruments do not permit cash withdrawal or redemption. As these instruments do not facilitate payments and settlement for third party services, issue and operation of such instruments are not classified as payment systems.

Semi-Closed System Payment Instruments: These are payment instruments which can be used for purchase of goods and services, including financial services at a group of clearly identified merchant locations/ establishments which have a specific contract with the issuer to accept the payment instruments. These instruments do not permit cash withdrawal or redemption by the holder.

Open System Payment Instruments: These are payment instruments which can be used for purchase of goods and services, including financial services like funds transfer at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs / BCs.

“Persons would be permitted to issue only closed and semi-closed system payment instruments, including mobile phone based pre-paid payment instruments but Bank can issue all type of PPI.”

REQUIREMENTS /CONDITION

Persons, seeking authorization henceforth, shall have a

ü Minimum paid-up capital of Rs. 500 lakh and

ü Minimum positive net worth of Rs. 100 lakh at all the times.

Necessary instructions, if any, for the existing PPI issuers for compliance of enhanced capital requirements will be notified separately.

The maximum value of any pre-paid payment instruments shall not exceed Rs 50,000/-.

The following types of semi closed pre-paid payment instruments can be issued on carrying out Customer Due Diligence as detailed:-

ü upto Rs.10,000/- by accepting minimum details of the customer provided the amount outstanding at any point of time does not exceed Rs. 10,000/- and the total value of reloads during any given month also does not exceed Rs. 10,000/-. These can be issued only in electronic form;

ü from Rs.10,001/- to Rs.50,000/- by accepting any ‘officially valid document’ defined under Rule 2(d) of the PML Rules 2005, as amended from time to time. Such PPIs can be issued only in electronic form and should be non-reloadable in nature;

ü upto Rs.1,00,000/- with full KYC and can be reloadable in nature. The balance in the PPI should not exceed Rs.1,00,000/- at any point of time.

PRE-PAID GIFT INSTRUMENTS

Persons are permitted to issue pre-paid gift instruments subject to the following conditions:

ü The maximum validity of the pre-paid gift instruments shall be three years.

ü Maximum value of each such payment instrument shall not exceed Rs. 50,000/-.

ü These instruments shall not be reloadable.

ü Cash withdrawal shall not be permitted for such instruments.

ü Full KYC of the purchasers of such instruments shall be maintained. (Separate KYC would not be required in cases of customers who are issued such instruments against debit to their bank accounts in India which are fully KYC compliant).

ü The issuer shall maintain the details of the persons to whom such instruments have been issued and make available the same on demand. The issuer shall also ensure that full details of the ultimate beneficiary are obtained for furnishing to the regulator or Government, as and when requested.

ü Entities may adopt a risk based approach, duly approved by their Board, in deciding the number of such instruments which can be issued to a customer, transaction limits etc.

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