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License to Operate Semi Closed Wallet

Semi Closed Wallet License

The demand for a semi-closed wallet license has been increased, and, in India, the Semi-closed wallet license is well regulated by RBI. In this article we shall have a deep understanding of a semi closed wallet.

What is Semi Closed Wallet License?

The e-wallet, Payment Wallet or Semi-Closed Wallet segment has appeared as a rising star in the area of non-cash transactions in India. Moving towards a cashless economy is the concern of all policymakers, academicians, and commercial enterprises.

The demonetization drive of Prime Minister Narendra Modi has increased the online transaction rate at a rapid speed, contributing to over 65% of the overall business, which earlier was subjected to just 15 %.

The use of e-wallets along with other instruments, such as debit and credit cards, will not only help to curb the corruption rate in the country but will also lead to lower interest rates and increase the supply of money in the economy.

Types of Wallet License in India

Types of Wallet License

E-wallets are primarily categorized into three types- closed wallets, semi-closed wallets, and open wallets.

  • Closed wallets allow you to make purchases of goods and services from a specific provider issuing such wallets, but do not facilitate cash withdrawal, e.g. Ola money.
  • Semi-closed wallets facilitate the purchase of goods and services from a group of clearly identified merchants, who agree to accept the payment instrument after entering into a specific contract with the issuer of wallet. These instruments also do not permit cash withdrawal or redemption by the holder, E.g. Paytm.
  • Open wallets can be used anywhere to purchase goods and services, and also allows you to withdraw cash from the ATM. VISA and MasterCard are the prime examples of open wallets.

Procedure for obtaining Wallet License in India

We are going to discuss the procedure to obtain a license for operating a semi-closed wallet. The Reserve Bank of India issues licenses for the operation of semi-closed wallets in India under the Payment and Settlement Systems Act, 2007. All the existing entities issuing semi-closed wallets shall apply within three months from the date of their coming under the purview of the Act.

RBI provides guidelines regarding eligibility criteria and conditions for the operation of various e-wallets systems in the country. After the advent of the aforementioned act in 2007, various banking and nonbanking entities as specified by RBI are engaged in the issuance of prepaid payment instruments after obtaining necessary license or approval, and complying with the guidelines issued by RBI in this regard.

Who can Apply for Semi-Closed Wallet License?

Apply for Semi-Closed Wallet License

Basic Conditions for the Issuance of a Semi-Closed Wallet License

  1. In the case of banks and NBFCs, the minimum capital requirements shall be attained as notified by RBI from time to time;
  2. For other persons seeking a license, a minimum paid-up capital of 500 lacs and minimum positive net worth of 100 lacs shall be attained and maintained;
  3. Only companies incorporated in India and satisfying the capital requirements as prescribed by consolidated FDI policy guidelines shall be eligible to apply for the license to issue semi-closed wallets;
  4. Any person/entity intending to operate the business of semi-closed wallets shall follow the guidelines of RBI on KYC, Money laundering etc.;
  5. A separate record of all the transactions undertaken using these instruments shall be maintained by entities issuing semi-closed wallets and shall be made available for scrutiny by RBI.

The types of Semi Closed Wallets:

The following categories of semi-closed wallets shall be issued after conducting proper customer due diligence:

  • Prepaid Payments Instruments up to 10000 rupees where minimum details of PPI holder are obtained;
  •  Prepaid Payments Instruments up to 10000 rupees with loading only from bank account;
  • Prepaid Payments Instruments up to 1 lakh rupees where KYC is completed.

All semi-closed wallets should have a validity of six months from the date of its issuance. All transactions covered by the wallet should be duly honored by the entity issuing it before the expiry of the wallet provided sufficient balance is outstanding on the wallet. A well-defined and working mechanism for customer protection shall be established by every entity issuing such wallets.

After the demonetization move, RBI relaxed the limits of Mobile Wallets[1] from INR 10,000 to INR 20,000 temporarily, and merchants are allowed to transfer INR 50,000 per month from wallets to their banks. This has been done to encourage the use of mobile wallets.


The Indian e-wallet market is expected to grow at a CAGR of 196% during FY 2017 to FY 2022 and reach INR 1512 Billion by the end of FY 2022 as compared to INR 1.54 Billion during the FY 2016. We may see increased use of e-wallet transactions all around the world in the coming years.

Read our article:All You Must Know About Semi Closed Wallet

Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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