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In this article, we will discuss the use of fund collected on E-wallets and RBI has issued certain guidelines which have to be followed by the Semi-closed wallet license holder.
The E-wallets are the prepaid payment instruments existing in the financial markets for enabling the customers to purchase goods and services as well as transfer funds against the value stored in those wallets. Basically, the e-wallets or m-wallets are of three types:
The concept of e-wallets may be new in the Indian context, but its growth rate is quite high. This concept is also known by the name of m-wallet. The financial market is flooded with many products that are gradually extending their reach into all the nooks and corners of the country.
The e-wallet has arisen as a high profit and high growth proposition due to its enormous potential for value addition with the aim of making country a cashless economy and a superpower nation, ahead of China. The increased use of smartphones and the internet has further brought an upward trend in the e-wallet market. Telecom operators have gradually reduced their internet charges, thereby acting as the catalyst for the e-wallet market.
Before the demonetization drive of Prime Minister Narendra Modi in November 2016, the percentage of the cash transactions in the country accounted for 96% of all the monetary transactions. As a result of the drive, there has been an immense increase in the transactions done through cheques, debit and credit cards, e-wallets or m-wallets intended to curb corruption in the country. Online transactions now account for 65% of overall business versus 15 % before the drive.
The future of e-wallets in India largely depends on the e-wallet license, which is provided by the RBI. A large number of telecom operators and third-party payment service providers, such as Pay U Money, apply for the license daily.
Any entity desirous of getting into the business of issuance of e-wallets to the consumers shall apply to the Reserve Bank of India (RBI) for the license. To bifurcate, banks are permitted to issue all categories of e-wallets after obtaining a license from RBI; however, NBFCs and other persons are permitted to issue only closed or semi-closed e-wallets.
A minimum paid-up capital of INR 500 lakh and by 2020 Rs. 2500 Lakh. at all the times are required to be maintained by all persons, except banks and NBFCs, seeking authorization for the issuance of e-wallets. Banks and NBFCs shall be required to comply with the capital adequacy requirements as prescribed by RBI.
A number of funds collected against the issuance of e-wallets at a point of time could be significant. Moreover, the revenue from funds may also be speedy. In case the settlement of funds is certain and in a timely manner, the confidence of the public and merchants, on the e-wallet system shall increase rapidly. To guarantee the timely settlement, the issues shall invest the funds collected only as from the issuance of e-wallets as follow:
The use of e-wallets has increased significantly and this trend is expected to gain further momentum considering the various initiatives from the government with regards to Digital India.
Read our article: Prepaid Payment Instruments– Say goodbye to your cards