Retail Banking Pre-paid payment instruments (PPIs) are payment instruments

Retail Banking

Pre-paid payment instruments (PPIs) are payment instruments

to purchase of goods and services & funds transfer, against the value stored on such instruments. The value represents the value paid for by the holders by cash, by debit to a bank account, or by credit card. The PPI 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.

The PPIs that can be issued are classified under 3 categories.

1. Closed System Instruments: These are issued by a person

to facilitate purchase from him and not for cash withdrawal or redemption. These are not classified as payment systems.

2. Semi-Closed System Instruments: These can be used

for purchase, at a group of identified merchant establishments having a specific contract with the issuer to accept the instruments. These do not permit cash withdrawal or redemption.

3. Open System Payment Instruments: These can be used

for purchase, including financial services like funds transfer at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs / BCs.

Eligibility to issue PPI:

Banks that comply with the eligibility criteria can issue all categories of PPIs. NBFCs and other persons can issue only closed and semi-closed system PPIs, including mobile phone based PPIs.

Capital Requirements

Banks and Non-Banking Financial Companies (incorporated in

India) should comply with Capital Adequacy requirements of RBI.

Other persons shall have a minimum paid-up capital of Rs. 500 lakh and min positive net worth of Rs. 100 lakh at all the times.

Categories of Pre-paid Payment Instruments

1. The maximum value of any pre-paid payment instruments shall not exceed Rs 50,000, unless specific limit is prescribed.

2. The following semi closed PPIs can be issued on carrying out Customer Due Diligence:

i. upto Rs.10,000/- by accepting minimum details of the customer

provided outstanding amount or credit in a month does not exceed

Rs. 10,000/- (only in electronic form)

ii. from Rs.10,001/- to Rs.50,000/- by accepting any ‘officially valid document’ as per PML Rules 2005 (only in electronic form and should be non-reloadable)

iii. upto Rs.1,00,000/- with full KYC and can be reloadable in nature.

Open PPI after full KYC, can be issued by banks in addition to semi closed PPIs.

Conditions for issue of Prepaid Gift instrument :

a. The maximum validity shall be 3 years and maximum value shall not exceed Rs. 50,000/-.

b. These shall not be re loadable and cash withdrawal shall not be permitted.

c. Full KYC of the purchasers and beneficiary of such instruments shall be maintained.

Conditions for issue of PPI by banks to Govt. Agencies for onward issuance to beneficiaries of Govt. schemes:

a. Verification of the identity of the beneficiaries shall be by Government Organizations.

b. The maximum value of each such payment instrument shall not exceed Rs. 50,000/-.

Conditions for issue of PPI by banks to other Financial Institutions for credit of onetime/ periodic payments by these organizations to their customers:

a. These instruments shall be loaded / reloaded only by debit to a bank account.

b. The maximum value of such payment instrument shall not exceed Rs. 50,000/-.

Conditions for issue of PPI by banks for credit of cross border inward remittance.

a. Banks can issue PPI to principal agents approved under Money Transfer Service Scheme (MTSS) or directly to the beneficiary.

b. The card shall be loaded only with the remittance proceeds received under the MTSS guidelines.

c. Maximum value of such instrument shall not exceed Rs. 50,000.

d. Splitting of single credits among different modes of payment shall not be permitted. Any amount received in excess of Rs.50,000 under MTSS should be paid by credit to a bank account.

Conditions for issue of PPI by banks to Corporates for

onward issuance to their employees:

a. Prepaid payment instruments can be issued only to corporate entities listed in any of the stock exchanges in India.

b. These prepaid payment instruments shall be loaded / reloaded only by debit to the bank account.

c. The maximum value outstanding on individual prepaid payment instruments at any point of time shall not exceed Rs. 50,000/-.

Conditions for issue of multiple PPIs by banks from fully-KYC compliant bank accounts for dependents / family members:

a. Only one card can be issued to one beneficiary.

b. The transaction and monthly limits as applicable for cash payout arrangements under DMT guidelines (currently Rs 10,000 per transaction with a monthly ceiling of Rs 25,000) will be applicable.

Conditions for Rupee denominated PPIs for visiting

foreign nationals and NRIs :

a. The cards can be issued by overseas branches of banks in India upto a maximum amount of Rs.2 lakhs by loading from a KYC compliant bank account.

b. PPIs should be activated only after traveller arrives in India.

c. Monthly cash withdrawal will be restricted to Rs 50,000.

Conditions for PPI for Mass Transit Systems (PPI-MTS)

1. The PPI-MTS will contain the Automated Fare Collection

application related to the transit service to qualify as PPI-MTS;

2. The minimum validity will be six months from the date of issue;

3. The PPI-MTS may be re loadable in nature and at no point of time the value / balance in PPI can exceed the limit of Rs. 2,000.

Validity

1. All PPIs issued shall have a minimum validity period of six months

from the date of activation/issuance to the holder.

2. PPI issuers shall caution the PPI holder at reasonable intervals, during the 30 days’ period prior to expiry of validity period of PPI, before forfeiting outstanding balances in the PPI, if any.

Transactions Limits

1. There is no separate limit on purchase, using PPIs.

2. In the case of open system PPIs issued by banks in India, cash withdrawal at POS can be up to a limit of Rs.1000 per day subject to the same conditions as applicable to debit cards (for cash withdrawal at POS).