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If an individual is planning to start a Prepaid Payment Instrument (PPI), obtaining Prepaid Wallet License is an absolute necessity. Prepaid Payment Instruments are methods that facilitate transactions of goods that are purchased and services availed by the consumer.
RBI has specified some requirement which is required to be fulfilled before issuing prepaid payment instrument, those requirements are:
A mobile wallet is a process in which the use of plastic cards is completely eliminated. This means that mobile wallets are a replacement of debit and credit cards. Through the wallet system, all the information that is generally in debit cards and credit cards will be stored in the database of the wallet and carried in a digitalized form. Mobile devices such as smartphones, tablets, smartwatches are great examples of making payments. As per this process, the money is collected and retained by the software in the particular application which is being used for making the payment. That particular amount which is to be paid is transferred to the seller’s account who will accept it.
Basic Mobile Wallet Account: This account can be operated as soon as the application is installed on the smartphone and the individual fills in all the required information. This account allows the individual to load and spend Rs 20,000 per month.
The full KYC Account: This account is an upgraded version of the basic account this can be operated only after completing the KYC Details and submitting the required documents.
The upgraded version provides the following facility:
These types of instruments are usually issued by entities which may include individuals, sole-proprietorships, partnership firms etc. These are majorly used for the purchase of goods and services from that particular entity only. As these instruments cannot be used for making payments for third party transactions and to other entities, the issue and operation of this type do not require any approval from the Reserve Bank of India.
This category of PPIs can be used for the purchase of goods and services from a group of merchants that join hands for this purpose only. In Semi-closed wallets, Cash withdrawal and redemption is not permitted by the holder of such instruments. RBI approval is a must before starting this type of business. Thus, all entities including individuals as well as NBFCs will be permitted to undertake the business of semi-closed wallets after obtaining a license from Reserve Bank of India.
This is a type of wallet which can be used to purchase goods and services and also allow cash withdrawal at ATM’s. These wallets can be used for the purchase of goods including financial services such as funds transfer from the merchants, cash withdrawal at automated business operators. All Visa and Master cards are a great example of open wallets. Only banks are authorized to issue and operate open-wallets.
There is no separate capital requirement prescribed for Licensed/Scheduled Banks or NBFCs registered with Reserve Bank of India (RBI). They must be authorized to issue the PPI after obtaining approval from RBI.
A minimum net-worth of 25 crores is required as per the last audited Balance Sheet which shall be maintained by all entities.
The issuance of the prepaid wallet license in India depends on the type of entity.
The first step is setting up the company as per the Companies Act, 2013 by filing an application through the Registrar of Company.
Application filing for the approval in Form A as mentioned in Regulation 3(2) of the Payment and Settlement System Regulations, 2008. Fees is to be paid to the Reserve Bank of India for the grant of License. Documents are to be submitted at this step.
The screening process is conducted by RBI to ensure that the applicants are fulfilling all the criteria and are eligible.
The next step is to meet the eligibility criteria for which Reserve Bank of India(RBI) issues an ‘in-principle’ approval. The validity of in-principle approval issued by RBI will be six months from the date of granting the in-principle approval.
The company is required to submit a System Audit Report to RBI within six months. If the company fails to submit the report, the in-principle approval will lapse automatically. The entity can take a one-time extension of six months by making an appeal in writing in advance with valid reasons.
The last step is when the applicant waits for approval. The final approval is granted to him after final evaluations. The business is required to start within six months after securing the Certificate of Authorization.
Prepaid Payment Instruments (PPIs) are devices that streamline payments of goods and services when individuals do not have enough cash with them. The use of cash is been minimized after the introduction of this system. The electronic cards, also known as E-wallets, have made online transactions simple and less complicated. With the optimal use of advanced technology, companies are achieving success by solving consumer’s basic problem of carrying cash; hence it is a great move.