Prepaid Wallet License

Types of Prepaid Wallet License: A Guide on Different PPIs

Prepaid Wallet License

The Reserve Bank of India has made numerous initiatives to facilitate payments and make transactions tech-savvy, which has led to the introduction of Payment Wallet Licenses or Prepaid Payment Instruments. The payment services are carried out by cards, the internet, or through mobile devices and are governed by financial regulations. The Reserve Bank of India is an authority responsible for issuing licenses for prepaid payments and payments wallets. The RBI is also in charge of publishing policies and regulations for prepaid wallet license. Payment wallet instruments enable the purchase of goods and services using the value that has been stored in them. A prepaid Wallet License is provided under the Payment and Settlement System Regulations, 2008. And the primary purpose of a prepaid wallet license is to allow its customers to make purchases or conduct transactions through the online platform.

What are Payment Wallet Licenses/ Prepaid Payments Instruments?

Banks and non-bank entities have been issuing Prepaid Payment Instruments in the country. Prepaid payment instruments are payment instruments that enable purchases of goods and services using the value that has been stored on them. The amount that is fixed on these instruments corresponds to the amount that the holder has paid using cash, a debit from a bank account, or a credit card. The term’ prepaid payment instruments can also refer to pre-loaded cards or digital wallets that are used for online transactions.

 Pre-paid instruments are distributed as follows:

  • Smart cards
  • Cards with magnetic strips
  • Digital wallets
  • Phone wallets
  • Online accounts
  • Mobile accounts
  • Paper vouchers

Any such device that allows access to the pre-paid amount (collectively called Prepaid Payment Instruments). The RBI periodically publishes instructions and regulations for the usage of the Prepaid Wallet License. These guidelines must be followed by the entities that apply for the license.

Procedure for getting a License

  • Apply to the Registrar of Companies to form the company under the Companies Act 2013[1].
  • Apply for approval in Form A and the necessary fees to the Reserve Bank of India for the issuance of a license in accordance with Regulation 3(2) of the Payment and Settlement Systems Regulations, 2008.
  • The RBI will conduct a fundamental screening procedure to confirm the applicant’s eligibility.
  • The Reserve Bank of India grants an “in-principle” approval, subject to the fulfilment of the qualifying requirements and other restrictions. This approval is valid for six months from the date it was granted.
  • The company must submit a thorough system audit report to the RBI within six months, failing which the RBI “in-principle” approval will expire. The company may, however, file an appeal for a six months extension in advance, justifying writing.
  • The entities receive final approval after all provided information has been taken into account. The business must start operating within six months after the certificate of authorization is granted.
READ  What is Perspective of Money Mobile in India

Benefits of Prepaid Wallets

The following are some benefits of maintaining prepaid wallets:

  • Prepaid Payment Instruments are multi-layered encryption that provides data security.
  • Even with online payment methods like internet banking, numerous data are required throughout the payment process, and the money cannot be transmitted until 24 or 12 hours after the beneficiary has been added. No issues of this nature arise with wallet-based transactions.
  • Prepaid wallets are theft free because they are password-protected, unlike physical wallets, which may get stolen.
  • For these wallets, there are no service fees to be paid. There is no installation fee, but there are annual fees for services like IMPS or debit cards.
  • Additionally, some wallets provide rewards and incentives for referrals.
  • Working professionals can make on-time payments by the due dates because of these automated payment facilities.
  • These wallets are simple to load with cash. Money can be added to these wallets through debit cards and online banking.

Types of Prepaid Wallet Licenses or Prepaid Payment Instruments in India

Old classification under the 2017 regulations categories PPIs into three: 

  • Closed system PPI
  • Semi-closed PPI
  • Open system PPI

These prepaid wallet licenses are not regulated or supervised by RBI.

New Classification of PPIs

Small PPI –  Small PPIs, which include both facilities with and without cash loading, are permitted to be provided by banks and non-banks in accordance with the new RBI Master Directions on Prepaid Payment Instruments introduced in 2021.

  • Cash Loadable Small PPI
  • Cash Non-Loadable Small PPI

Cash Loadable Small PPI – These prepaid payment instruments, however, are issued in electronic form and are reloadable. One can utilize this provided instrument to purchase goods and services. A group of specified merchants with a specific relationship to a payment aggregator is utilized in connection with the small PPIs (Payment gateway like Phonepe, Gpay, etc.). 

The maximum loaded amount is Rs.10,000 per month and Rs. 1,20,000 for every financial year. The outstanding amount to be maintained is Rs. 10,000, and the total amount that can be debited in a month is limited to Rs. 10,000. These payment instruments can be loaded and reloaded with cash or electronically, and small PPIs should transform into full KYC PPIs within 24 months of the date of issue.

Cash Non-Loadable Small PPI – Cash withdrawals and fund transfers are not permitted with small PPIs. The maximum amount that can be loaded each month is Rs. 10,000 and Rs. 1,20,000 in a financial year. Additionally, the outstanding balance to be maintained is Rs. 10,000, and the amount to be debited is Rs. 10,000 in a month. There is no requirement for cash, non-loadable small PPIs to convert into full KYC PPIs.

READ  Deployment of Money Collected on E-wallets

Full KYC PPI – These KYC PPIs are issued by banks and non-banks after completing KYC (Know Your Customer) procedure. These PPIs are used for cash withdrawals and money transfers. The complete KYC limit has been increased from Rs. 1,00,000 to Rs. 2,00,000. It can be reloaded. In the case of such pre-registered beneficiaries, the fund’s transfer limit shall not exceed Rs.2,00,000/- per month per beneficiary. PPI issuer shall set the limits within this ceiling considering the risk profile of the PPI holders, other operational risks, etc. 

The PPI issuer must additionally provide a choice to close the PPI and transfer the remaining amount in accordance with the applicable limits of this type of PPI. Cash withdrawal is allowed for PPI issued by non-bank entities up to a limit of Rs. 2,000 per transaction and Rs. 10,000 per month across all channels.

Gift PPIs – The maximum amount under gift PPI is Rs. 10,000, and they are not allowed to be reloaded. Fund transfers and cash withdrawals are not permitted in gift PPI. While a separate KYC is not necessary for customers using this instruments like debit and credit cards, the PPI issuer maintains KYC information. When requested by the PPI holder, these PPIs shall be revalidated (including through the issuance of the new instruments).

PPI for Mass Transit Systems – Only after receiving permission from the relevant authority in accordance with the PSS Act does the Mass Transit Systems operator issue these PPIs. Automated fare collection is a key component of transit services, and these PPIs are only utilized at outlets with on-site operations. The PPI issuer chooses which customer detail is necessary for such PPIs. The PPI – MTS issued is reloadable, and its total outstanding value cannot be allowed to exceed Rs. 3,000. Under this PPI, money transfers and cash withdrawals are not permitted.

Eligibility for Prepaid Wallet License or Payment Wallet Licenses

  • Banks and Non-Bank Finance Companies (NBFC) that meet the qualifying requirements may issue all types of prepaid payment instruments.
  • For banks and NBFCs, there is no minimum capital requirement. Before using PPIs, however, the RBI’s approval is needed.
  • To apply for a license for a prepaid wallet, NBFCs or other entities must have a net worth of at least five crores.
  • The FEMA-approved entities are not subject to any minimum capital requirements. They can only use PPIs for a specific and limited number of current accounts.
  • The Reserve Bank of India has given some banks the approval to offer mobile banking transactions. Such banks are allowed to introduce mobile-based prepaid payment methods.
  • In other situations, entities would only be allowed to issue closed-system and semi-closed-system prepaid payment instruments.
READ  How You can Also Make Your Wallet Like Paytm?

Capital Requirements 

  • Prepaid payment instruments may only be issued by banks and non-bank financial companies that comply with the capital adequacy requirement set forth from time to time by the Reserve Bank of India.
  • A company having the primary goal of the financial business has to be registered in India under the Companies Act 1956 / Companies Act 2013.
  • Any financial corporation requesting RBI clearance for a payment wallet must have a minimum net value of 5 crores. 
  • Entities permitted by FEMA to issue foreign exchange prepaid payment instruments are exempt from the application of these rules. The use of such payment instruments must comply with the Foreign Exchange Management (Current Account Transactions) Rules, 2000, as revised from time to time.

Validity of Prepaid Wallet License

The minimum validity of the issued Prepaid Wallet License is one year from the last loading or reloading date in PPIs. PPI issuers may, however, choose to issue PPIs with longer validity. Unless otherwise stated, the RBI’s certificate of prepaid wallet license is valid for five years. However, it is also open to reviewing, including RBI’s potential revocation. Customers have the opportunity to get a new card if PPIs are issued in the form of a card ( with a validity period specified on the card).

Payment instrument balances that are outstanding are not instantly cancelled when they expire. 10% of the outstanding value per month can be used to deplete the value. The expiration of the validity of the payment instruments is properly notified to the holders in advance. The application for renewal must be made three months from the date of expiration.


Prepaid wallets have a lot of advantages, and they are now the preferred method of sending money. These wallets are fast-track methods for transfers with a 24-hour maximum transfer time, and they can never be stolen or lost. They are simple to load and offer several incentives for spending more money on them. Additionally, there are no additional fees associated with activating such wallets.

Also Read: How to obtain a Prepaid Wallet License in India?

Trending Posted

Get Started Live Chat