RBI Proposes Measures to Enhance Prepaid Payment Instruments Regulation

RBI Proposes Measures to Enhance Security and Conducive Framework for Prepaid Payment Instruments

The Reserve Bank of India (RBI) has proposed several measures to develop a more conducive framework for the long-term growth of Prepaid Payment Instruments (PPIs). The proposed measures aim to enhance transaction security and provide clearer rules on refunds and grievance redressal.

PPIs are payment instruments in which money is loaded and which facilitate subsequent transactions utilizing the fund. These instruments are categorized as general purpose PPI, gift PPI, transit PPI, PPI for Non-Resident Indians (NRIs), besides certain other specific purpose PPI.

As part of its continued efforts to develop a conducive framework for long-term growth of PPIs with enhanced security of transactions, the RBI has undertaken a comprehensive review of the extant guidelines. A draft Master Direction on Prepaid Payment Instruments was issued, and comments are invited by May 22, 2026.

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According to the draft, a bank permitted by RBI to issue debit cards can issue PPIs, with prior intimation to the Department of Payment and Settlement Systems (DPSS), Central Office, RBI, Mumbai. A non-bank entity can also issue PPIs after authorization from the RBI.

A non-bank applicant shall have a minimum net-worth of Rs 5 crore, and shall submit a certificate...from its statutory auditor. Furthermore, a non-bank PPI issuer should attain a minimum net-worth of Rs 15 crore by the end of the third financial year of authorization.

The RBI proposed that the amount outstanding in general purpose PPI should not exceed Rs 2 lakh at any point of time, and cash loading in such PPI should be limited to Rs 10,000 per month. Loading of PPI for foreign nationals/NRIs shall be against receipt of foreign exchange by cash or through any payment instrument. Total amount debited from such PPI during any month shall not exceed Rs 5 lakh.

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The draft also said refunds in case of failed, returned, rejected, or cancelled transactions should be applied to the respective PPI immediately, even if such refunds result in exceeding the prescribed limits for that specific PPI category. Refunds of transactions done using any other payment instrument would not be credited to PPI.

The RBI also proposed that a PPI issuer should facilitate interoperability with card network or Unified Payments Interface (UPI), on the issuer side to a holder of Full-KYC PPI, as per the conditions prescribed by the respective network provider. A PPI issuer may also facilitate discovery of PPI on third-party UPI mobile applications.

Additionally, a PPI issuer should disclose all features of PPI, and all associated charges, validity period, and terms and conditions in clear and simple language (preferably in English, Hindi, and the local language) to the holder while issuing the PPI. Agents of the PPI issuer should not impose any charges on the customers.

The draft also proposed norms for limiting liability of customers in unauthorized PPI transactions. A non-bank PPI issuer shall maintain the funds collected against issuance of PPIs in a separate escrow account (in INR) with a commercial bank in India.