The PPIs were given the option of becoming interoperable in 2018. Customers of one firm transmit funds to customers of another company, bank, or PPI through this option. This option was only available to individuals who completed a full KYC. The migration to KYC PPIs has not been completed after two years. But before talking about the changes let us first know what PPIs are. WHAT IS PREPAID PAYMENT INSTRUMENTS: Prepaid Payment Instruments (PPIs) are payment instruments that permit the purchase of goods and services, including the allocation of funds, economic services, and remittances, against the value stored within or on the instrument, as specified by the RBI under the Payment and Settlement Act, 2005. The value stored in the instrument is the amount that the holder or the instrument has already paid for using any method, such as cash, debit from a bank account, credit card, or even other PPIs. Payment wallets, smart cards, magnetic chips, coupons, and mobile wallets are all examples of PPIs. A PPI is an instrument that can be utilised to gain access to a prepaid amount. Till date, some alterations have been made to increase the transfer of PPIs to full KYC. The remaining balance limit in PPIs will be increased from Rs 1 lakh to Rs 2 lakh. Cash withdrawal will be allowed for full KYC PPIs issued by non-bank PPI issuers. Nonbanks, such as central bank regulated payment system operators, will be able to join RBI-operated Centralised Payment Systems (NEFT and RTGS).
VARIOUS TYPES OF PREPAID PAYMENT INSTRUMENTS: There are five kinds of payment instruments:
1. CLOSED SYSTEM PPIs The close system stipulates that the PPI issued can only be used for purchases made from the organisation that issued it in the first place. When a person tries to purchase things or services from a different provider, the PPI will be invalid. Cash withdrawals against the amount saved in the PPI are likewise not possible with this approach. The issuing of PPIs does not require the RBI's previous approval because this system is not classified as a payment system by the RBI. Closed systems are exemplified by the following examples. PPIs are paper vouchers, gift vouchers, and coupons; they also include smart cards, such as metro railcards and chips, that can only be used in the establishments that issue them. For Example Reliance Supermarkets, etc.
2. SEMI CLOSED PPIs They are issued under the semi-closed system, unlike those issued under the closed system, can be used at a variety of institutions but not all of them. PPIs can only be issued by banking institutions or non-banking institutions that have been approved by the RBI under this framework. Without the RBI's prior approval or authorisation, PPIs cannot be issued. They can be used for purchases, remittance services, and other transactions in a set of explicitly designated merchants, either by geography or by individual establishments, that have signed special contracts with the PPI issuer to accept PPIs as payment. For Example Mobiwik and Paytm.
3. OPEN PPIs They can only be issued by financial institutions that have been approved by the RBI under the open system. These instruments can be used for purchases, remittances, and cash withdrawals, among other things. Debit and credit cards are examples of PPIs issued under this method.
4. SEMI OPEN PPIs These are payment instruments that can be used to buy products and services from any merchant who accepts credit cards (Point of sale terminals). The holder of these instruments is unable to withdraw cash or redeem them.
5. MOBILE SERVICE PROVIDERS: They issue these prepaid talk time instruments. This value of talk time can also be used to purchase 'value-added services' from the mobile service provider or third-party service providers.
Registration Procedure: To register, the subsequent procedure has to be followed:
Step1: To acquire the PPI License, an application in Form A with the prescribed government fee and other papers and details has to be submitted to the Reserve Bank of India, as per Regulation 3(2) of the Payment and Settlement System Regulations, 2008.
Step 2: The RBI will begin the screening process to authorize that the applicants are, at the very least, eligible.
Step-3: RBI will also conduct checks on critical factors such as customer service and efficacy, technological and other related measures, as well as safety and security.
Step-4: The RBI gives an "in-principal approval" after it is pleased with the Applicant's qualifying conditions and checks its fit and suitable status. The validity of the issued inprincipal agreement is six months from the date of its issuance.
Step-5: Within six months, the company must submit a satisfactory audit report to RBI. Otherwise, the in-principal clearance will lapse immediately unless the organisation submits the System Audit Report (SAR). The Company can request a six-month extension once only by filing a written plea with all appropriate explanations in advance.
Step 6: The Company will be given concluding approval after all of the particulars provided by entities have been considered. The company must begin operations within six months of receiving the Certificate of Authorization.
REQUIRED DOCUMENTS: The following list of documents is essential to attain a licence to issue Prepaid Payment Instruments:
a. Claimant's full name.
b. Proof of Registered Office Address
c. Certificate of Incorporation (Certificate of Incorporation)
d. The Company's Statutory Auditor.
e. Profits anticipated for the Indian financial system.
f. Capital Amount Proposed
g. The financial year's audited balance sheet.
h. A comprehensive report on the entity's primary business
i. Names and addresses of the company's bankers.
j. Managerial specifics.
k. Funding Sources
l. Any additional information that the RBI requires.
SCAM PREVENTION AND SECURITY ASPECTS
Prepaid payment instrument issuers must set up enough data, a central database, and security architecture, as well as fraud prevention and detection systems. Customer protection: All issuers of prepaid payment instruments must publish all key terms and conditions in plain and straightforward language, including: All fees and costs associated with the usage of the instruments. The instrument's expiration period, as well as the terms and circumstances that come with it. For customer service, the phone number and website URL are provided. The entity that issues prepaid payment instruments must set up a system for dealing with consumer complaints that is both efficient and effective.
A prepaid expenditure card, also known as a corporate expense card, is a card for offline charges that is preloaded with a set amount and can be swiped several times until the maximum is reached. It has the same appearance as a physical debit or credit card, but it removes and minimises the associated labour. These cards make it easier to keep track of cash dealings and other offline activities. Prepaid expense cards are the most efficient way to keep track of your out-of-pocket business spending. You can preload the card with a set amount and split it across the team. You set expenditure limits and authorise and accept access for your team based on the total budget and the team.