Prepaid Wallet License

All You Must Know About Semi Closed Wallet

Semi Closed Wallet

In India, currently in the area of non-cash transactions, the demand for e-wallets, Payment Wallets or Semi-Closed Wallets has increased and appears as a rising star. Semi-closed wallet license is well-regulated by the Reserve Bank of India.

A cashless economy is the main concern of policymakers, academicians, and commercial enterprises. The online transaction rate has increased at a rapid speed because of the demonetization drive of Prime Minister Narendra Modi from 15% to 65% of the overall business.

What are the Benefits of using Semi Closed Wallet?

  • It will help in curbing the corruption rate in the country.
  • It will also lead to lower interest rates and increase the money supply in the economy of the country.

E-wallets allow the purchase of goods and services from identified merchants, who, after entering into a specific contract, agree to accept the payment instrument with the issuer of the wallet.

These types of payment instruments do not permit cash withdrawal or redemption by the holder.

What is the Procedure for Obtaining Semi Closed Wallets License?

In India, for obtaining Semi Closed Wallet license, The Reserve Bank of India issues licenses under the Payment and Settlement Systems Act, 2007 for the operation of semi-closed wallets. Existing entities shall apply within three months from the date of coming into the purview of the Act.

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In India, RBI issues guidelines from time to time regarding eligibility criteria and conditions for the operation of various e-wallets in the country.

RBI specified various banking and non-banking entities engaged in the issuance of prepaid payment instruments after obtaining the necessary license from the RBI, which comply with the guidelines issued by the RBI in this regard.

Semi Closed Wallet
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What are the Eligibility Criteria for Semi Closed Wallet License?

  • Banks are subject to fulfilling the eligibility criteria, including those stipulated by the regulatory authority “RBI”.
  • Banks are permitted to provide mobile banking transactions by the Reserve Bank of India.
  • Non-Banking Financial Companies (NBFCs) only after obtaining authorization from RBI.
Semi Closed Wallet

What are the Requirements for the Issuance of a Semi-Closed Wallets License?

  • For Semi Closed Wallet license, the minimum capital requirements shall be attained as notified by RBI from time to time in the case of banks and NBFCs;
  • In the case of non-banking entities, there is a requirement of minimum paid-up capital of Rs. 5 crores as per the latest audited balance sheet;
  • Only companies incorporated in India satisfying the capital requirements as prescribed under FDI policy guidelines shall be eligible to apply for the license;
  • There is a requirement from an entity intending to operate semi-closed wallets shall follow the guidelines of RBI on KYC, Money laundering etc.;
  • A separate record shall be maintained of all the transactions undertaken by entities issuing semi-closed wallets, and it shall be made available for scrutiny by RBI.
  • Non-bank entities having Foreign Direct Investment (FDI) / Foreign Portfolio Investment (FPI) / Foreign Institutional Investment (FII) shall meet the applicable capital requirements as per the FDI policy guidelines of the Government of India.
  • The Memorandum of Association (MOA) shall cover the proposed activity of operating as a PPI issuer.
  • A certificate from their Chartered Accountants regarding the current net worth along with a provisional balance sheet shall be submitted by newly incorporated non-bank entities which may not have an audited statement of financial accounts.
  • A certificate from the Chartered Accountants shall be submitted by all authorized non-bank entities to evidence compliance with the applicable net worth as per the audited balance sheet of the financial year within 6 months of completion of that financial year.

In Semi-closed wallets there should be a validity of six months from the date of its issuance. It is required for every entity issuing such semi closed wallets to establish a well-defined and working mechanism for customer protection.

Semi-Closed PPIs by Bank and Non-Bank PPI Issuers

Semi-closed PPIs through banks & non-banks would have similar features unless specified.

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Prepaid Payment Instruments up to ₹10,000/- through accepting minimum details of the holder

  • After obtaining the minimum details of the PPI holder, bank and non-bank Issuers shall be permitted to issue these PPIs.
  • The details will comprise the following:

a. Verified Mobile number by One Time Pin (OTP) and

b. Self-declaration of name and unique identification number of any of the ‘officially valid document’ defined under Rule 2(d) of the PML Rules 2005, as amended from time to time.

  • These PPIs shall only be issued in electronic form, including cards.
  • In PPIs, during any month amount shall not exceed ₹10,000/- whereas the total amount shall not exceed ₹1 00,000/- during the financial year.
  • Outstanding amount at any point in such PPIs shall not exceed ₹.10,000/-
  • The total debited amount will not exceed ₹. 10,000/- during any assumed month.
  • It will only be used for buying goods & services. However, the funds’ transfer from such PPIs to bank accounts and to PPIs of the same/other issuers shall not be permitted.
  • No specific limit on the acquisition of goods & services using PPIs.
  • PPI providers have to ensure that this category of PPI will not be issued to the same user using the same mobile number & similar minimum details in future.
  • There will be an option given by PPI providers to close the PPI at any time & outstanding balance will be transferred at the request of the holder to the ‘own bank account of the PPI holder’ (duly verified by the Issuer) after obeying with KYC requirements of the PPI holder.
  • PPIs up to ₹1, 00,000/- only after Completing the KYC of the PPI Holder.
  • The amount outstanding shall not exceed ₹ 1, 00,000/- at any point in time.
  • The features of such PPIs shall be clearly communicated to the PPI holder through SMS / e-mail/post or by any other means at the time of issuance of the PPI / before the 1st filling of funds.
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