Prepaid Wallet License
The Reserve Bank of India (RBI) has taken many steps to promote fast track money transfer . Payment Wallet License is also known as Prepaid Wallet License. Payment Wallet License permits its user to purchase items or to make transactions in an easy way using digital platform. There are many forms of Prepaid wallet License, they are:
- Debit Card or Credit Card
- Internet Wallets
- Mobile Accounts
- Paper Vouchers
Before putting Prepaid Wallet Instruments to use it is essential to obtain License for the same. The Reserve Bank of India (RBI) from time to time issues outlines rules and guidelines related to Prepaid Wallet License. Any non-Bank entity that seeks to obtain prepaid license must adhere to the given guidelines before applying for prepaid wallet license.
What is Payment Wallet/Prepaid Wallet Instruments?
Prepaid Payment Instruments are payment instruments that facilitate the purchase of goods and services against the stored value on such instruments. The value fixed on such instruments represents the value paid by the holder by way of cash, debit to bank account or by credit card.
The prepaid instruments can be issued as:
Magnetic Stripe cards, Internet Accounts, Smart Cards, mobile wallets, mobile accounts, paper vouchers and any such instruments that can help in using prepaid amount or payment amount.
What are the Type of Prepaid Payment Instruments for Obtaining Payment Wallet License?
Before obtaining Prepaid Wallet License, an individual or entity must know the types of Prepaid Payment Instruments that is available:
Closed System Payment Instruments
This type of payment instrument is generally issued by the business establishment to use it at their respective establishment only. Cash withdrawal or redemption is not permitted in this instrument.
Semi-Closed Payment Instruments
This payment instrument is redeemable at a group of clearly identified merchant locations or establishments. Here the contract is specifically made with the issuer to accept the payment instrument. The holder here is not permitted cash withdrawal or redemption.
Semi-Open System Payment Instruments
This type of payment instruments can be used for purchase of goods and services at any card accepting merchant locations. The holder here is not permitted to withdraw cash here.
Open System Payment Instruments
These payment instruments can be used for both the purchase of goods and services as well as permit cash withdrawal at ATMs.
Eligibility for Obtaining Prepaid Wallet License
These are the following entities are eligible to obtain prepaid wallet License. They must meet the following requirement as specified for them:
- Scheduled Banks and Non-banking Financial Institutions (NBFCs): These institutions need to obtain prior approval from Reserve Bank of India (RBI) for purpose of obtaining the Payment Wallet License.
- New Incorporations: The newly incorporated companies that do not have an audited financial statement must get a duly certified certificate from a Chartered Accountant (CA) .They must declare the current net worth and also prepare a provisional balance sheet.
- Any company having Foreign Direct Investment/ Foreign Institutional Investment: These companies must have a minimum capital as per the guidelines of the FDI policy.
- All other entities: All other entities need to have a minimum net worth of Rs. 25 Crore as per their latest audited balance sheet.
- The company incorporated under Companies Act: A private or public company incorporated as per the Companies Act 2013 can do this business of issue of prepaid wallet only if it is authorized by its object clause in Memorandum of Association.
What is the Minimum Capital Requirements to Obtain Prepaid Wallet License?
The Minimum capital requirements to obtain a Prepaid Wallet License or Payment Wallet License for different entities are listed below:
NBFCS or Scheduled Banks: There is no specified minimum capital requirement prescribed for NBFCs or Scheduled Banks to obtain a Prepaid Wallet License/ Payment Wallet License. However, they need to obtain approval from RBI and must have an authorization to issue prepaid instruments.
Any other Entity: Any other Entity Obtaining authorization from RBI must have a minimum net worth of Rs. 5 crore.
FEMA Authorized Entities: The entities that are authorized under the Foreign Exchange Management Act for purpose of issue of foreign exchange prepaid wallets are exempted from the guidelines. Those payment instruments need to be used for limited permitted current account.
What are the Requirements for obtaining Prepaid Wallet License/ Payment Wallet License?
The following listed are the requirements for obtaining Prepaid Wallet License/ Payment Wallet License:
- The Net worth shall consist of the following items:
1) Paid-up Equity capital;
2) Preference shares;
3) Free Reserves;
4) Share premium account; and
5) Capital reserves representing surplus.
- The Banks and RBIs need to obtain approval from the supervisory Department of RBI and NBFCs.
- Any existing entity who has the permission to issue prepaid instrument and also has obtained a license from RBI according to the past capital requirement needs to increase their net worth as per the guidelines before September 30 , 2020
- Companies getting registration as per the Companies Act, 2013 have to obtain a license from the RBI.
- The object clause of the Memorandum of Association shall allow the company to undertake the activities of the issuer of payment instruments.
What is the Procedure to Obtain a Prepaid Wallet License/Payment Wallet License?
The following are the procedures to get the authorization for getting a Prepaid Wallet License/ Payment Wallet License:
Step-1: Incorporate a Company under Companies Act, 2013 by applying to Registrar of Company.
Step-2: Making an Application inn Form A for approval as per under Regulation 3(2) of the Payment and Settlement System Regulations, 2008, with the prescribed fee and the below mentioned details to Reserve Bank of India to obtain License.
- Name of the Applicant.
- Address Proof of Registered Office.
- Incorporation Certificate.
- A Complete Report of the principle business of the entity.
- Detail of the Management.
- Statutory Auditor of the Company.
- Audited Balance sheet of the financial year.
- Name and Address of Bankers of the Company.
- Expected profits to Indian Financial System.
- Proposed Capital Amount.
- Sources of Funds.
- Any other Information required by RBI.
Step-3: The RBI shall initiate the Screening process to ensure prima facie eligibility of the applicants.
Step-4: After the RBI is satisfied regarding the Applicant’s eligibility criteria, it issues an ‘in-principle’ approval. The validity of the issued in-principle approval shall be six months from the date of granting such approval.
Step-5: The Company needs to submit a satisfactory Audit Report to RBI, within six months. If the company fails to submit the Audit Report, the in-principle approval shall lapse automatically. The Company can receive one-time extension of six months by making an appeal in writing in advance with all the valid reasons.
Step-6: After considering all the particulars furnished by entities, the Company will be granted a final approval. The company has to commence business within six months from the grant of Certificate of Authorization
What are the Documents Required for Obtaining Prepaid Wallet License?
The following documents are required for getting a prepaid wallet license/ Payment Bank License:
- Name of the applicant
- Registered office address proof
- Certificate of Incorporation
- Objects of the company
- Information about management
- Details of statutory auditors
- Audited balance sheet
- Name and address of the bankers to the company.
What are the Benefits of Having a Prepaid Wallet License?
The advantages of keeping prepaid wallet License or prepaid wallets are as follows:
- Prepaid Wallets can never be stolen or lost as they are safe inside the mobile, as physical wallet can sometimes be lost or stolen.
- The problem of change money generally faced is removed in case of payments made through online prepaid wallets.
- Even the online payments such as the internet banking need many details and in some banks, the amount can be transferred only after 24 hours or 12 hours of adding the beneficiary. There is no such problem in these wallets as money can be transferred instantly.
- There is no or minimal extra cost for running these wallets. One does not need to pay activation fee, monthly charges or annual fees as in the case of IMPS in internet banking or the annual charge of debit cards.
- These wallets also give incentives and rewards for referring to someone.
- Loading money in these wallets is not at all a difficult task. Money can be added to these wallets through net banking, debit cards within a short span of time.
- Auto pay facilities of these wallets works as a savior for working persons who usually forget their due payment dates.
What is the Validity Period of Prepaid Wallet License/Payment Wallet License?
- The Prepaid Wallet License or Payment Wallet License issued in India shall have a minimum validity period of six months from the date of issuance or activation of the holder.
- Further, in case of non-reloadable Prepaid Wallet License, the transfer of outstanding amount done at the time of expiry of the payment instrument to a new payment issuer may be permitted.
- The outstanding balances at the prepaid wallet shall not be terminated immediately, at the expiration of the instrument.