RBI permits banks, non-banks to issue PPIs for making payments in public transport systems

The Reserve Bank of India (RBI) on Friday permitted bank, non-bank managed prepaid payment instruments to make payments across various public transport systems. It said these instructions are issued under Section 18 read with Section 10 (2) of Payment and Settlement Systems Act, 2007 (Act 51 of 2007). The instructions will come into effect immediately.

"Public transport systems across the country cater to a multitude of commuters on a daily basis. To provide convenience, speed, affordability, and safety of digital modes of payment to commuters for transit services, it has been decided to permit authorised bank and non-bank PPI issuers to issue PPIs for making payments across various public transport systems," the RBI said in a notification on February 23. 

Earlier, in its master directions for PPI issuers, RBI had stated that authorised issuers will need to obtain permission before launching any mass-transit payment instruments. With the current circular, previous guidelines will be modified.

In 2021, the Master Directions on PPIs were originally issued by the RBI. As per the directions, PPIs are instruments that facilitate the purchase of goods and services, financial services, remittance facilities etc, against the value stored therein. 

PPIs that require RBI approval/authorisation before issuance are classified under two types, small PPIs, and full-KYC PPIs.

Small PPIs are administered by both banking and non-banking bodies upon submission of basic information from the holder. These financial tools are exclusively employed for procuring goods and services without the option for fund transfer or cash withdrawal.

Conversely, there exist comprehensive Know Your Customer (KYC) compliant PPIs distributed by comparable institutions following a substantive KYC process involving the holder. Unlike their smaller counterparts, these instruments not only cater to purchasing goods and services but also permit cash withdrawals and funds transfers.

Last month, the central bank barred Paytm Payments Bank Ltd (PPBL) from accepting deposits, credit transactions, or top-ups in any customer accounts, wallets, NCMC and FASTags. NCMC stands for National Common Mobility Card, which is an interoperable transport card facilitated by the Indian government for travel on metro and buses.

Later this month, the RBI gave  Paytm Payments Bank another 15 days until March 15, 2024, to cease accepting deposits, credit transactions, or top-ups in any customer accounts, wallets, NCMC and FASTags.

It said: "Users can continue to utilise NCMC cards issued by Paytm Payments Bank until the available balance is exhausted. However, they won't be able to add funds to these cards after March 15, 2024. Users are advised to obtain NCMC cards from other banks or non-bank prepaid instrument (PPI) issuers before the deadline to avoid inconvenience."

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