TITLE: India's Reserve Bank Updates Master Directions on Prepaid Payment Instruments
BODY:
On December 27, 2024, the Reserve Bank of India (RBI) updated its Master Directions on Prepaid Payment Instruments (PPIs), consolidating previous guidance issued since October 2017. The updated directions, issued under Section 18 of the Payment and Settlement Systems Act, 2007, apply to all prepaid payment instrument issuers—both banks and non-banks—and system participants operating in India.
The Master Directions establish a comprehensive regulatory framework governing PPI authorisation, regulation and supervision. Key provisions include eligibility requirements for banks and non-bank entities; capital and net-worth requirements (minimum Rs.5 crore initially, increasing to Rs.15 crore within three years for non-banks); authorisation processes including in-principle and final approval stages; and customer protection measures. The directions define two primary PPI categories: Small PPIs (issued with minimum customer details, limited to Rs.10,000 per month) and Full-KYC PPIs (issued following complete Know Your Customer verification, with outstanding balances not exceeding Rs.2,00,000).
The framework addresses interoperability requirements, mandating PPI issuers to enable access through Unified Payments Interface (UPI) and authorised card networks. It establishes transaction limits, security requirements including two-factor authentication for wallet transactions, and comprehensive customer grievance redressal procedures. The directions also specify deployment of funds collected, requiring non-bank issuers to maintain escrow accounts with scheduled commercial banks. Additionally, it outlines customer liability limitations for unauthorised electronic payment transactions and reporting requirements for net-worth certificates, grievance statistics, and system audit reports.
The updated Master Directions consolidate 28 previous circulars and partially consolidate nine additional circulars, streamlining regulatory guidance for PPI issuers operating in India's digital payments ecosystem.