What is a PPI License?

A Prepaid Payment Instrument (PPI) license is a regulatory approval granted to entities that offer prepaid payment services. These services typically involve the issuance of prepaid instruments such as prepaid cards, mobile wallets, and other electronic payment methods.

The PPI license is mandated by regulatory authorities to ensure that companies operating in the prepaid payment space adhere to prescribed guidelines and meet specific criteria.

Purpose of the PPI License:

Consumer Protection:

The primary purpose of requiring a PPI license is to protect consumers. By obtaining regulatory approval, companies commit to safeguarding the interests of users, ensuring the security of their funds, and providing transparent and reliable prepaid payment services.

Prevention of Money Laundering and Fraud:

Regulatory authorities implement stringent guidelines to prevent money laundering and fraudulent activities. A PPI license sets the groundwork for robust anti-money laundering (AML) and know your customer (KYC) procedures, helping authorities monitor and curb illicit financial activities.

Maintaining Financial Stability:

The issuance of PPI licenses contributes to maintaining the overall financial stability of the economy. Regulatory bodies aim to strike a balance between fostering innovation in the payment space and safeguarding the financial system from potential risks associated with unregulated prepaid payment services.

Encouraging Innovation:

While regulations are put in place to ensure accountability, they also aim to encourage innovation in the financial technology sector. The PPI license framework allows innovative payment service providers to operate within a legal and regulated environment.

What is the Reserve Bank of India?

The Reserve Bank of India (RBI) is the central banking institution of India, responsible for the issuance and regulation of the Indian Rupee and the overall supervision of the financial system in the country. Established on April 1, 1935, under the Reserve Bank of India Act, the RBI plays a pivotal role in formulating and implementing monetary policy, ensuring the stability of the Indian financial system, and fostering economic development.

Key functions and responsibilities of RBI include:

Monetary Policy Formulation:

The RBI is entrusted with the task of formulating and implementing monetary policy in India. It uses various instruments, such as the repo rate, reverse repo rate, and cash reserve ratio, to regulate money supply, inflation, and interest rates in the economy.

Currency Issuance:

The RBI has the sole authority to issue currency notes in India. It ensures an adequate supply of currency to meet the requirements of the public and the economy.

Regulation of Banking and Financial Institutions:

The RBI regulates and supervises banks and financial institutions in India to maintain the stability and integrity of the financial system. It sets prudential norms, conducts inspections, and takes corrective measures to address issues within the banking sector.

Foreign Exchange Management:

Managing the country's foreign exchange reserves and formulating policies related to foreign exchange control are integral responsibilities of the RBI. It aims to ensure the stability of the external value of the Indian Rupee.

Developmental Functions:

The RBI plays a key role in promoting the development of financial institutions and markets. It works towards fostering a sound and efficient financial system that can support economic growth.

Banker to the Government:

The RBI acts as the banker, agent, and advisor to the central and state governments. It manages government accounts, conducts government transactions, and helps in raising capital through the issuance of government securities.

Financial Inclusion:

The RBI promotes financial inclusion by encouraging banking services for all sections of society, especially in underserved and rural areas. It implements policies and initiatives to enhance access to financial services.

Payment and Settlement Systems:

The RBI oversees and regulates payment and settlement systems in the country. It plays a crucial role in facilitating secure and efficient payment mechanisms.

Research and Data Collection:

The RBI engages in economic research, data collection, and analysis to understand economic trends, provide policy insights, and contribute to informed decision-making.

The Reserve Bank of India is governed by a Central Board of Directors, headed by the Governor. The Central Board includes officials appointed by the Government of India, as well as representatives from various sectors. The RBI's headquarters is located in Mumbai, and it has regional offices across India to oversee and coordinate its functions throughout the country.

History of the Reserve Bank of India

The history of the Reserve Bank of India (RBI) dates back to the early 20th century when the idea of establishing a central bank in India was first proposed. RBI was formally established in 1935, and its journey has been closely tied to India's economic and financial development. Here's a brief overview of the history of RBI:

Early Initiatives:

The idea of having a central bank for India was first proposed by the Royal Commission on Indian Currency and Finance in 1926. The commission recommended the establishment of a central bank to regulate the currency and credit system of the country.

Establishment of RBI:

The Reserve Bank of India was established on April 1, 1935, in accordance with the provisions of the Reserve Bank of India Act, 1934. The Act came into effect on April 1, 1935, and the RBI commenced operations as the country's central banking institution.

Sir Osborne Smith - First Governor:

Sir Osborne Smith, a prominent banker, became the first Governor of the RBI. Under his leadership, the RBI started its operations and assumed the responsibilities outlined in the RBI Act.

World War II and the RBI:

The outbreak of World War II had significant implications for the global economy, and the RBI played a crucial role in managing India's financial affairs during this challenging period. The war had severe economic consequences, and the RBI had to navigate through various challenges to maintain stability.

Post-Independence Reforms:

After India gained independence in 1947, the RBI underwent various reforms to align its functions with the needs of the newly independent nation. The government nationalized the RBI in 1949, making it a state-owned institution.

Monetary Policy Framework:

The RBI gradually assumed the responsibility of formulating and implementing monetary policy to stabilize prices and promote economic growth. It introduced various policy tools, such as the Cash Reserve Ratio (CRR) and the Statutory Liquidity Ratio (SLR), to regulate liquidity in the banking system.

Banking Sector Reforms:

Over the years, the RBI has played a pivotal role in implementing significant reforms in the banking sector. This includes nationalization of major banks in 1969 and 1980, and later, liberalization and deregulation measures in the 1990s.

Financial Sector Reforms:

The RBI actively participated in financial sector reforms aimed at enhancing efficiency, promoting competition, and strengthening the financial system. This included the establishment of new financial institutions and the introduction of market-oriented instruments.

Technological Advancements:

In recent decades, the RBI has embraced technological advancements in the financial sector. It has facilitated the implementation of electronic funds transfer systems, digital payment mechanisms, and other innovations to modernize the payment and settlement infrastructure.

Global Integration:

The RBI has also played a role in integrating India into the global financial system. It has actively participated in international forums and collaborated with other central banks to address global economic challenges.

RBI has been a key institution in India's economic journey, adapting to changing circumstances and playing a central role in shaping the country's monetary and financial policies. Its history reflects the broader economic development and evolution of India as a modern nation.

Importance and Role of the Reserve Bank of India

Monetary Policy and Inflation Control:

RBI plays a critical role in formulating and implementing monetary policy. By setting key interest rates like the repo rate and using other monetary instruments, the RBI aims to control inflation and stabilize prices. Its policies impact borrowing costs, influencing spending and investment patterns in the economy.

Financial Stability and Banking Regulation:

The RBI is responsible for ensuring the stability of the financial system in India. It regulates and supervises banks and financial institutions, establishing prudential norms and conducting regular inspections. By maintaining the health of the banking sector, the RBI contributes to overall financial stability and protects the interests of depositors.

Currency Issuance and Management:

As the sole authority for issuing currency notes in India, the RBI manages the design, production, and distribution of currency. This function is crucial for maintaining confidence in the monetary system, ensuring an adequate money supply, and preventing counterfeiting.

Government Banking and Fiscal Support:

Serving as the banker to the government, the RBI manages government accounts, facilitates financial transactions, and assists in the issuance of government securities. This relationship helps in effective fiscal management, financing government operations, and maintaining the stability of the fiscal system.

OmniCard's PPI License

OmniCard holds a PPI License from RBI. This license ensures they operate according to RBI regulations. This license signifies OmniCard's compliance with the regulatory framework set by the RBI for prepaid instruments, ensuring that its operations are secure, transparent, and in line with the country's financial regulations. By holding this license, OmniCard demonstrates its commitment to providing safe and reliable prepaid payment solutions to its users, contributing to the growth and development of the digital payments ecosystem in India.

FAQ's regarding PPI

Prepaid Payment Instruments (PPIs) have become an integral part of our modern financial landscape, offering convenience and flexibility in transactions. Whether you're a seasoned user or someone just getting acquainted with PPIs, we to address the most frequently asked questions to enhance your understanding of these digital payment tools.

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1. What are PPIs?

Ans. PPIs are instruments that facilitate purchase of goods and services, conduct of financial services, enable remittance facilities, etc., against the value stored therein.

2. Who are the issuers of PPIs?

Ans. PPIs can be issued by banks and non-banks. Banks can issue PPIs after obtaining approval from RBI. The non-bank PPI issuers are companies incorporated in India and registered under the Companies Act, 1956 / 2013. They can operate a payment system for issuing PPIs to individuals / organisations after receiving authorisation from RBI.

3. Who is a holder of a PPI?

Ans. A holder of a PPI is an individual who obtains / purchases the PPI from the PPI issuer. However, in case of a gift PPI, any other intended / targeted beneficiary, though not being the purchaser, can also be a holder.

4. What are the various types of PPIs?

Ans. PPIs that require RBI approval / authorisation prior to issuance are classified under two types:

Small PPIs (or minimum-detail PPIs): These PPIs are issued by banks and non-banks after obtaining minimum details of the PPI holder. These PPIs can be used for purchase of goods and services at a group of clearly identified merchant locations / establishments which have a specific contract with the issuer (or contract through a payment aggregator / payment gateway) to accept the PPIs as payment instruments. Funds transfer or cash withdrawal from such PPIs is not permitted.

Full-KYC PPIs: The PPIs are issued by banks and non-banks after completing Know Your Customer (KYC) of PPI holder. These PPIs can be used for purchase of goods and services, funds transfer or cash withdrawal.

5. What are the types of Small PPIs?

Ans. Small PPIs can be of two types:

PPIs upto ₹10,000/- (with cash loading facility). These PPIs shall be converted into full-KYC PPIs within 24 months.

PPIs upto ₹10,000/- (with no cash loading facility).

6. What are included in details to be obtained in the two types of Small PPIs?

Ans. The minimum details in both types of Small PPIs are same and are as under:

mobile number verified with One Time Password (OTP); and

7. What are the salient features of the two types of Small PPIs?

Ans. Both types of Small PPIs are reloadable and shall be used only for purchase of goods and services. Their salient features are as follows:

PPIs upto ₹10,000/- (with cash loading facility):

The amount loaded during any month shall not exceed ₹10,000/-;

The total amount loaded during the financial year shall not exceed ₹1,20,000/-;

The amount outstanding at any point of time shall not exceed ₹10,000/-;

The total amount debited during any given month shall not exceed ₹10,000/-;

These PPIs shall be converted into full-KYC PPIs within 24 months; and

Loading / Reloading can be by cash or electronic means.

PPIs upto ₹10,000/- (with no cash loading facility):

The amount loaded during any month shall not exceed ₹10,000/-;

The total amount loaded during the financial year shall not exceed ₹1,20,000/-;

The amount outstanding at any point of time shall not exceed ₹10,000/-;

Loading / Reloading shall be from a bank account / credit card / full-KYC PPI; and

The Small PPIs (with cash loading facility) existing as on December 24, 2019 can be converted to this PPI, if desired by the PPI holder.

self-declaration of name and unique identity / identification number of any mandatory document or Officially Valid Document (OVD) or any such document with any name listed for this purpose in the RBI’s Master Direction on KYC. The present list of mandatory document / OVDs include passport, driving licence, voter's identity card, NREGA job card, proof of possession of Aadhaar number and letter issued by the National Population Register.

8. What are the salient features of a ‘Full-KYC’ PPI?

Ans. The salient features of ‘Full-KYC’ PPIs are as follows:

Reloadable in nature;

The amount outstanding shall not exceed ₹2,00,000/- at any point of time;

There are no limits prescribed for total credits or debits during a month; and

They can be used for purchase of goods and services, cash withdrawal and funds transfer.

9. What is the minimum validity period of a PPI?

Ans. All PPIs shall have a minimum validity period of one year from the date of last loading / reloading in the PPI. PPI issuers are, however, free to issue PPIs with a longer validity. Issuers shall clearly indicate the expiry period of the PPI to the customer at the time of issuance of PPIs.

10. What will happen to a PPI that is not used for a certain period?

Ans. A PPI with no financial transaction for a consecutive period of one year shall be made / treated inactive after sending a notice to the PPI holder. It can be reactivated only after validation and applicable due diligence.

11. Is it mandatory for a PPI issuer to allow interoperability?

Ans. Yes, it is mandatory for a PPI issuer to allow interoperability. It is mandatory for the PPI issuer to give the holders of full-KYC PPIs interoperability through authorised card networks and UPI. All modes of acceptance (including QR codes) and PPI issuance are required to be interoperable by March 31, 2022.

12. What are the modes of interoperability?

Ans. If the PPI is issued in the form of wallet, interoperability across PPIs shall be enabled through UPI. If the PPI is issued in the form of card, the card shall be affiliated to the authorised card network for interoperability.

13. How many PPI issuers have been approved by RBI? Where can I find the list of authorised bank and non-bank PPI issuers?

Ans. The list of PPI issuers is available on the RBI website at the links https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2491 (bank-PPI issuers) and https://www.rbi.org.in/Scripts/PublicationsView.aspx?id=12043 (non-bank PPI issuers).

14. What are the cash withdrawal limits in case of PPIs issued by banks?

Ans. In case of bank issued PPIs, cash withdrawal is permitted at ATMs, PoS devices, BCs, etc. However, cash withdrawal at PoS devices is subject to a limit of ₹2,000/- per transaction within an overall monthly limit of ₹10,000/- across all locations (Tier 1 to 6 centres).

15. What are the cash withdrawal limits in case of PPIs issued by non-banks?

Ans. In case of non-bank issued PPIs, cash withdrawal is permitted upto a limit of ₹2,000/- per transaction within an overall monthly limit of ₹10,000/- per PPI across all channels (agents, ATMs, PoS devices, etc.).

16. Where can the customer report an unauthorised transaction in his / her PPI account?

Ans. Non-bank PPI issuers shall provide customers with 24x7 access via website / SMS / e-mail / dedicated toll-free helpline for reporting unauthorised transactions and / or loss or theft of the PPI. Further, a direct link for lodging of complaints, with specific option to report unauthorised electronic payment transactions shall be provided by non-bank PPI issuers on the mobile app / home page of their website / any other evolving acceptance mode.

Benefits of the PPI License

Acquiring a Prepaid Payment Instrument (PPI) license comes with several benefits for both financial institutions and non-bank entities. Here are some key advantages associated with holding a PPI license

Diversification of Financial Services:

PPI licenses allow banks and non-bank entities to diversify their financial service offerings. They can provide customers with a range of prepaid products, enhancing their market presence and competitiveness.

Financial Inclusion:

PPIs play a crucial role in promoting financial inclusion by providing individuals who may not have access to traditional banking services with a means of participating in the formal financial system. PPIs are often more accessible to unbanked or underbanked populations.

Convenience and Accessibility:

PPIs offer a convenient and accessible mode of payment for users. They can be used for various transactions, including purchasing goods and services, online shopping, and money transfers. This convenience is particularly beneficial in today's digital age.

Reduced Cash Dependency:

PPIs contribute to the reduction of cash dependency in the economy. Users can load funds onto their prepaid instruments, reducing the need for physical currency and promoting a more secure and traceable financial ecosystem.

Innovation and Technological Integration:

Holding a license encourages innovation in financial technology (FinTech). PPI issuers often invest in cutting-edge technologies, mobile apps, and digital platforms to enhance the user experience and stay competitive in the rapidly evolving financial landscape.

Interoperability Opportunities:

Licenses often come with the requirement of interoperability, enabling users to transact seamlessly across different payment platforms. This enhances the overall user experience and expands the reach of PPI services.

A PPI may also be referred to as a prepaid wallet license informally but the correct official term is 'Prepaid Payment Instruments (PPIs)'