What are prepaid payment instruments?
Prepaid payment instruments are non-bank financial instruments that allow you to store money in a secure electronic account and use it for purchases at merchant locations or for online transactions. Examples of prepaid payment instruments are mobile wallets and gift cards. Mobile wallets can be used for making online payments, paying utility bills, recharging your mobile phone, booking movie tickets, purchasing movie and concert tickets, etc.
Prepaid payment instruments can be issued as smart cards, magnetic strip cards, internet accounts, internet wallets or mobile accounts. Most prepaid payment instrument issuers offer multi-purpose accounts that can be used for various transactions depending on the restrictions imposed by them.
Entities that are regulated by the Reserve Bank of India (RBI).
Prepaid payment instruments (PPIs) can be issued only by entities that are regulated by the Reserve Bank of India (RBI). These include:
- Banks.
- Non-banking finance companies (NBFCs).
- Mobile operators.
- To issue PPIs, non-bank entities must have a net worth of at least Rs 5 crore.
Types of PPIs prepaid payment instruments?
The following are the various types of PPIs:
- Closed System PPI: These can be issued only by authorized persons or entities. The value stored on these instruments is accessed only through specified merchant outlets or services.
- Semi-closed System PPI: These can be issued by banks and other entities, who have been authorized to issue such instruments. Value stored on these instruments can be accessed by using a card, code or any other means at points of acceptance that have been authorized to accept these instruments for purchase of goods and services. They do not include the facility for cash withdrawal.
- Open System PPI: These can be issued by banks and other entities who have been authorized to issue such instruments. There is no restriction on the use of these instruments in terms of the merchants or the point-of-sale terminals that are allowed to accept them. They include the facility for cash withdrawal at ATMs and also allow for fund transfer from one instrument to another via electronic means, as long as both instruments are issued in accordance with the guidelines issued by RBI in this regard.
The prepaid payment instruments(PPIs) are issued in the form of cards, wallets or any such instruments which facilitate purchase of goods and services, against value stored on such PPIs.
All PPIs shall be issued only by entities that have been granted authorisation by the Reserve Bank of India. The PPIs can be issued in physical or electronic form.
The entities eligible for authorisation for issuance of PPIs are:
- The prepaid payment instruments(PPIs) are issued in the form of cards, wallets or any such instruments which facilitate purchase of goods and services, against value stored on such PPIs.
- All PPIs shall be issued only by entities that have been granted authorisation by the Reserve Bank of India. The PPIs can be issued in physical or electronic form.
- The entities eligible for authorisation for issuance of PPIs are:
- Banks;
- Non-banking finance companies (NBFCs);
- Department of Posts (India Post);
- Non-bank Prepaid Payment Instrument Issuers (PPI Issuers) registered with RBI under Section 8 of Payment and Settlement Systems Act, 2007; and
- Entities authorized to set up an ATM/ White Label ATM Network by RBI under Section 28 of Banking Regulation Act, 1949.
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