RBI stops non-bank PPI issuers from loading wallets, cards via credit lines

The Reserve Bank has asked non-bank prepaid payment instrument (PPI) issuers not to load their wallets and cards from credit lines or preset borrowing limits.

FILE PHOTO: A man walks behind the Reserve Bank of India (RBI) logo inside its headquarters in Mumbai, India, April 8, 2022. REUTERS/Francis Mascarenhas (REUTERS)

The Reserve Bank has asked non-bank prepaid payment instrument (PPI) issuers not to load their wallets and cards from credit lines or preset borrowing limits. PPIs are instruments that facilitate purchase of goods and services, financial services, and remittance facilities, against the value stored therein.

As per the Master Directions on Prepaid Payment Instruments (PPI-MD) issued by the central bank, PPIs are permitted to be loaded / reloaded by cash, debit to a bank account, credit and debit cards, PPIs and other payment instruments issued by regulated entities in India and shall be in INR only.

Sources said the RBI has sent a communication regarding the ban to all authorised non-bank PPI issuers.

As per them, the RBI's communication read: "The PPI-MD does not permit loading of PPIs from credit lines. Such practice, if followed, should be stopped immediately. Any non-compliance in this regard may attract penal action under provisions contained in the Payment and Settlement Systems Act, 2007."

Mihir Gandhi, Payments Transformation Leader, PwC India said the loading of money via credit line has been restricted.

"There was a credit line which was used to fund multiple prepaid wallets / cards. Some fintechs' business models will be impacted," he said.

Banks and NBFCs will have to restrict providing credit lines to these fintechs to load the prepaid instruments.

"Banks / NBFCs may not have the complete visibility of where the funds of the prepaid instruments are being used or the end customer details," he added.

PPIs are issued as cards, wallets and in any such form/ instrument which can be used for transactions.

The central bank has barred issuance of PPI in the form of paper vouchers.