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Pre-paid Payment Instruments (PPIs)

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<p>Pre-paid Payment Instruments  (PPIs) are defined in the RBI Guidelines issued under the [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/86706.pdf Payment and Settlements Systems Act, 2005]  as payment  instruments that facilitate purchase of goods and services, including funds  transfer, against the value stored on such instruments. The value stored on  such instruments represents the value paid for by the holders by cash, by debit  to a bank account, or by credit card. The pre-paid instruments 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.</p>
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<p>The maximum value of any pre-paid payment instrument (where specific limits have not been prescribed) cannot exceed Rs 50,000/ (as on October 2015) and they have a minimum validity period of six months from the date of activation/issuance to the holder.</p>
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<p>PPIs can be  reloadable or non-reloadable.  Banks are  permitted to issue and reload such payment instruments at their branches and  ATMs against payment by cash/debit to bank account/credit card and through  their [http://arthapedia.in/index.php?title=Banking_Correspondent_(BC) business correspondents] (BCs).&nbsp;In the case of non-reloadable PPIs, the  outstanding amount in it can be transferred to a new similar PPI of the same  issuer, upon expiry.</p>
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<p>PPIs are one  component of the [http://arthapedia.in/index.php?title=Payment_System Payment System]. In fact, they constitute the last end of the spectrum of payment  instruments existing in India at the moment. The [https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/86706.pdf Payment and Settlement Systems Act, 2007] (PSS Act, 2007)&nbsp;which came into force with  effect from 12 August 2008, provides for the regulation and supervision of PPIs  in India.  Reserve Bank of India (RBI) is  the regulatory authority for this purpose.</p>
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<p>The confidence of the  public and merchant establishments on PPIs depends on certainty and timeliness  of settlement of claims arising from use of such instruments.</p><br />
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<p>'''Classification of Payment Instruments in India'''</p>
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<p>RBI has broadly classified the PPIs into three categories </p>
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*'''Closed System Payment Instruments:'''  These are payment instruments issued by an entity for facilitating the purchase  of goods and services from it. These instruments do not permit cash withdrawal  or redemption. As these instruments do not facilitate payments and settlement  for third party services, issue and operation of such instruments <em>are not classified as </em>[http://arthapedia.in/index.php?title=Payment_System <em>payment  systems</em>]. Hence,  RBI approval is not required for issuing them.
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<p>These are issued by companies for in-house goods and services and are sweetened with bonus points and cash backs to ensure the loyalty of their customers. Eg. Many of the web portals for online purchases /shopping - Make my Trip, Flipkart, Jabong etc. run wallets for its customers. Pre-paid cards of mobile companies also belong to this category.</p>
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*'''Semi-Closed System Payment Instruments:'''&nbsp;These  are payment instruments which can be used for purchase of goods and services,  including financial services at a group of clearly identified merchant  locations/ establishments which have a specific contract with the issuer to  accept the payment instruments. These instruments do not permit cash withdrawal  or redemption by the holder.
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<p>PPIs for amounts upto Rs.10,000/- can be created under this category by accepting minimum details of the customer, provided the amount outstanding at any point of time does not exceed Rs. 10,000/- and the total value of reloads during any given month also does not exceed Rs. 10,000/-. Amount upto Rs.50,000/- can be created in PPIs by accepting any ‘officially valid document’ which is compliant with anti-money laundering rules. Such PPIs are non-reloadable in nature; The above two can be issued only in electronic form;</p>
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<p>Amount upto Rs.1,00,000/- can be created by with full Know Your Client norms (KYC) and can be reloaded. </p>
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*'''Open System Payment Instruments:'''&nbsp;These  are payment instruments which can be used for purchase of goods and services,  including financial services like funds transfer at any card accepting merchant  locations [point of sale (POS) terminals] and also permit cash withdrawal at  ATMs / [http://arthapedia.in/index.php?title=Banking_Correspondent_(BC) Banking  Correspondents] (BCs). However, cash withdrawal at POS is  permitted only upto a limit of Rs.1000/- per day subject to the same conditions  as applicable hitherto to debit cards (for cash withdrawal at POS).<br /><br />
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<p>'''Commonly found PPIs in India'''</p>
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<p>Some of the commonly found PPIs in India are:</p>
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*'''Mobile Prepaid Instruments:''' The prepaid talk time issued by mobile service  providers. This value of talk time can also be used for purchase of 'value  added service' from the mobile service provider or third-party service  providers.<br />
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*'''Gift Cards issued by Banks, NBFCs and other persons  (shops, companies etc):''' These are  non-reloadable cards issued for a maximum validity period of 3 years, upto the  specified limit (Rs. 50,000/-). Further, they cannot be redeemed against cash. <br />
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*'''Social benefit cards:''' Banks are permitted to issue PPIs to Government  Organisations for onward issuance to the beneficiaries of Government sponsored  schemes (eg. Food vouchers). Here verification of the beneficiary is not the  responsibility of banks, but is that of the government organization issuing  such cards. &nbsp;They can be loaded / reloaded upto the specified limit (Rs.  50,000 as on October 2015) only by debit to a bank account, maintained by the  Government Organizations with the same bank.<br />
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*'''Remittance Cards:''' These are PPIs issued by banks for credit of cross border inward  remittances.<br />
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*'''Corporate Cards:''' Banks are permitted to issue prepaid instruments upto the specified  limit (Rs.50 000 as on Oct 2015) to corporates listed on stock exchanges, for  onward issuance to their employees. These are linked to the bank accounts of  the employees but fundamental responsibility for identification of the  beneficiary lies with corporates and not with banks. These are loaded /  reloaded only by debit to the bank account and provides for facility of fund  transfer (for the amount remaining on the card) to the bank account of the  employee.<br />
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*'''Foreign Travel Cards:''' These are Rupee denominated non-transferable PPIs  issued by overseas branches of banks in India (directly or by cobranding with  the exchange houses/money transmitters) for visiting foreign nationals and Non  Resident Indians (NRIs). The cards can be issued upto a maximum amount of Rs.2  lakhs by loading from a [http://arthapedia.in/index.php?title=Know_Your_Client_(KYC) KYC] compliant bank account. However, cash withdrawal from such PPIs are  restricted to Rs 50,000/- per month.&nbsp;Such PPIs are activated by the bank  only after the traveller arrives in India and can be used only for transactions  in India. The transactions are settled in Indian Rupee.<br />
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*'''PPI for Mass Transit  Systems (MTS):''' These are semi-closed  PPIs issued by the mass transit system operator (eg. Metro trains, transport  corporations etc.) for automated fare collection. Apart from the mass transit  system, such PPIs can be used also at other merchants whose activities are  allied to or are carried on within the premises of the transit system. &nbsp;They are reloadable in nature and at no  point of time the value / balance in PPI can exceed the limit of Rs. 2,000/-.<br /><br /></p>
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<p>'''Who can issue prepaid payment instruments in India?'''</p>
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<p>Only those companies incorporated in India and have a minimum paid-up capital of Rs. 5 crore and minimum positive net worth of Rs. 1 crore at all the times are permitted to issue PPIs in India.</p>
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<p>Banks who comply with the eligibility criteria are permitted to issue  all categories of PPIs. However, only those banks which have been permitted to  provide Mobile Banking Transactions by the Reserve Bank of India are permitted  to launch mobile based pre-paid payment instruments (mobile wallets &amp;  mobile accounts). Non-Banking Financial Companies (NBFCs) and other persons are  permitted to issue only closed and semi-closed system payment instruments,  including mobile phone based pre-paid payment instruments. Non-bank persons  issuing payment instruments are required to maintain their outstanding balance  in an [http://www.investopedia.com/terms/e/escrow.asp escrow account] with any one of the scheduled commercial banks.</p>
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<p>Persons authorized under Foreign Exchange Management Act (FEMA) can issue foreign exchange pre-paid payment instruments and where such persons issue such instruments as participants of payment systems authorised by the Reserve Bank of India, they are exempt from the purview of strict guidelines related to pre-paid instruments. However, the use of such payment instruments are limited to permissible current account transactions and subject to the prescribed limits under the Foreign Exchange Management (Current Account Transactions) Rules, 2000. Otherwise, use of pre-paid payment instruments for cross border transactions are not permitted.</p>
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<p>Persons issuing pre-paid payment instruments have to maintain a log of all the transactions undertaken using these instruments. This data is made available for scrutiny by the Reserve Bank or any other agency / agencies as directed by RBI. They also need to file Suspicious Transaction Report (STR) to Financial Intelligence Unit – India (FIU-IND).</p><br />
  
 
<p>==Data==<br />
 
<p>==Data==<br />

Revision as of 07:11, 12 November 2015

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Pre-paid Payment Instruments (PPIs) are defined in the RBI Guidelines issued under the Payment and Settlements Systems Act, 2005  as payment instruments that facilitate purchase of goods and services, including funds transfer, against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holders by cash, by debit to a bank account, or by credit card. The pre-paid instruments 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 maximum value of any pre-paid payment instrument (where specific limits have not been prescribed) cannot exceed Rs 50,000/ (as on October 2015) and they have a minimum validity period of six months from the date of activation/issuance to the holder.

PPIs can be reloadable or non-reloadable.  Banks are permitted to issue and reload such payment instruments at their branches and ATMs against payment by cash/debit to bank account/credit card and through their business correspondents (BCs). In the case of non-reloadable PPIs, the outstanding amount in it can be transferred to a new similar PPI of the same issuer, upon expiry.

PPIs are one component of the Payment System. In fact, they constitute the last end of the spectrum of payment instruments existing in India at the moment. The Payment and Settlement Systems Act, 2007 (PSS Act, 2007) which came into force with effect from 12 August 2008, provides for the regulation and supervision of PPIs in India.  Reserve Bank of India (RBI) is the regulatory authority for this purpose.

The confidence of the public and merchant establishments on PPIs depends on certainty and timeliness of settlement of claims arising from use of such instruments.


Classification of Payment Instruments in India

RBI has broadly classified the PPIs into three categories

These are issued by companies for in-house goods and services and are sweetened with bonus points and cash backs to ensure the loyalty of their customers. Eg. Many of the web portals for online purchases /shopping - Make my Trip, Flipkart, Jabong etc. run wallets for its customers. Pre-paid cards of mobile companies also belong to this category.

PPIs for amounts upto Rs.10,000/- can be created under this category by accepting minimum details of the customer, provided the amount outstanding at any point of time does not exceed Rs. 10,000/- and the total value of reloads during any given month also does not exceed Rs. 10,000/-. Amount upto Rs.50,000/- can be created in PPIs by accepting any ‘officially valid document’ which is compliant with anti-money laundering rules. Such PPIs are non-reloadable in nature; The above two can be issued only in electronic form;

Amount upto Rs.1,00,000/- can be created by with full Know Your Client norms (KYC) and can be reloaded.

Commonly found PPIs in India

Some of the commonly found PPIs in India are:

Who can issue prepaid payment instruments in India?

Only those companies incorporated in India and have a minimum paid-up capital of Rs. 5 crore and minimum positive net worth of Rs. 1 crore at all the times are permitted to issue PPIs in India.

Banks who comply with the eligibility criteria are permitted to issue all categories of PPIs. However, only those banks which have been permitted to provide Mobile Banking Transactions by the Reserve Bank of India are permitted to launch mobile based pre-paid payment instruments (mobile wallets & mobile accounts). Non-Banking Financial Companies (NBFCs) and other persons are permitted to issue only closed and semi-closed system payment instruments, including mobile phone based pre-paid payment instruments. Non-bank persons issuing payment instruments are required to maintain their outstanding balance in an escrow account with any one of the scheduled commercial banks.

Persons authorized under Foreign Exchange Management Act (FEMA) can issue foreign exchange pre-paid payment instruments and where such persons issue such instruments as participants of payment systems authorised by the Reserve Bank of India, they are exempt from the purview of strict guidelines related to pre-paid instruments. However, the use of such payment instruments are limited to permissible current account transactions and subject to the prescribed limits under the Foreign Exchange Management (Current Account Transactions) Rules, 2000. Otherwise, use of pre-paid payment instruments for cross border transactions are not permitted.

Persons issuing pre-paid payment instruments have to maintain a log of all the transactions undertaken using these instruments. This data is made available for scrutiny by the Reserve Bank or any other agency / agencies as directed by RBI. They also need to file Suspicious Transaction Report (STR) to Financial Intelligence Unit – India (FIU-IND).


==Data==
Reserve Bank of India has issued Certificates of Authorisation under the Payment and Settlement Systems Act, 2007 for setting up and operating Payment System in India, including PPIs. The names of entities which have received such certificates for operating PPIs and the names of the pre-paid instruments run by them are given on the website of RBI.


==Also see==

Payment System.


==References==


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