What changed
Previously, only certain entities could issue semi-closed prepaid instruments. This circular amends paragraph 3.2 of the earlier guidelines to allow 'Other Persons' to issue mobile phone-based semi-closed prepaid payment instruments. The instruments are capped at Rs 5,000, cannot be purchased or reloaded using airtime/talktime, and cannot support person-to-person value transfers.
What it means for you
Banks and existing prepaid instrument issuers now face competition from non-bank entities in the mobile prepaid space, but with tight limits. The Rs 5,000 cap and prohibition on airtime conversion restrict use to small-value goods/services purchases. Lenders must ensure their own prepaid products remain compliant and competitive, while also noting that all issuers must seek RBI authorization under the Payment and Settlement Systems Act.
What you must do
- Review your existing prepaid payment instrument offerings to ensure compliance with the updated guidelines, especially KYC/AML/CFT norms.
- If you plan to issue mobile-based semi-closed prepaid instruments, apply for authorization from RBI's Department of Payment and Settlement Systems.
- Ensure that any mobile prepaid instruments you issue do not exceed Rs 5,000 and prohibit airtime conversion and person-to-person transfers.
- Update your risk management processes and include them in your authorization application.
Who it affects
All system providers and participants in payment systems, Banks issuing prepaid payment instruments, Non-bank entities (Other Persons) seeking to issue mobile prepaid instruments, Payment system operators under the Payment and Settlement Systems Act
What is a 'semi-closed' prepaid payment instrument?
A semi-closed instrument can be used for purchase of goods and services at a limited set of merchant locations or establishments that have a specific contract with the issuer, but cannot be used for cash withdrawal or person-to-person transfers.
Can these mobile prepaid instruments be used to transfer money to another person?
No, person-to-person transfer of value is explicitly not permitted for these instruments. They can only be used to facilitate purchase of goods and services.
Do I need RBI authorization to issue such instruments?
Yes, all persons proposing to operate payment systems involving issuance of these prepaid instruments must seek authorization from the Department of Payment and Settlement Systems under the Payment and Settlement Systems Act, 2007.