RBI allows non-bank entities to issue mobile prepaid instruments
Current · Source: Reserve Bank of India · RBI/2009-10/123 · issued 14 Aug 2009 · ~2 min read
Quick answerRBI now permits 'Other Persons' (non-bank entities) to issue mobile phone-based semi-closed prepaid payment instruments, capped at Rs 5,000, with strict KYC/AML/CFT compliance and no airtime conversion or person-to-person transfers allowed.
The rule, in the simplest words
Non-bank entities (Other Persons) can now issue mobile phone-based semi-closed prepaid payment instruments.
These instruments are capped at Rs 5,000 and cannot be purchased or reloaded using airtime/talktime.
Person-to-person value transfers are not allowed, and the instruments can only be used for goods and services purchases.
All issuers must comply with strict KYC/AML/CFT norms and seek RBI authorization under the Payment and Settlement Systems Act.
How it plays out — a real example
A KYC & compliance officer in Indore, Mr. Kumar, needs to update his bank's prepaid payment instrument offerings to ensure compliance with the updated guidelines. He reviews the existing products and ensures that they meet the Rs 5,000 cap and do not allow airtime conversion or person-to-person transfers. Mr. Kumar also applies for authorization from RBI's Department of Payment and Settlement Systems to issue mobile-based semi-closed prepaid instruments.
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
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
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.
📜 This document’s life story (2 recorded events, each backed by RBI’s own words)
RBI’s words: “A reference is invited to our circulars ... RBI/2009-10/123 ... dated August 14, 2009”
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/123
DPSS.CO.PD.No.344/02.14.06/ 2009-10
August 14, 2009
To
All System Providers, System Participants
and any other prospective prepaid payment instrument issuer
Dear Sir,
Policy Guidelines for issuance and operation of Prepaid Payment Instruments in India
A reference is invited to our circular no. RBI/2008-09/ 458, DPSS.CO.PD.No.1873 /02.14.06/ 2008-09 dated April 27, 2009, enclosing the policy guidelines on the captioned subject.
2. In amendment to paragraph 3.2 of the Guidelines, it has now been decided to permit Other Persons to issue mobile phone based semi-closed system pre-paid payment instruments. The entities proposing to issue such instruments shall fully comply with the above guidelines.
3. Entities issuing mobile phone based semi-closed payment instruments shall specifically note to ensure full compliance to the safeguards against money laundering (KYC/AML/CFT) provisions as stipulated under Para 6 of the above guidelines.
4. The mobile phone based semi-closed payment instruments issued by other persons shall also comply with the following conditions:-
The maximum value of such instruments shall not exceed Rs 5000/-.
The purchase/reloading of these instruments against the value of airtime/talktime shall not be permitted.
This facility shall be enabled only to facilitate purchase of goods and services. Person-to-person transfer of value shall not be permitted .
5. All persons proposing to operate payment systems involving the issuance of these Pre-paid Payment Instruments shall seek authorization from the Department of Payment and Settlement Systems, Reserve Bank of India, under the Payment and Settlement Systems Act, 2007. The application for authorization shall also include the risk management process that would be adopted by the entity.
6. The directive is issued under section 18 of Payment and Settlement Systems Act 2007, (Act 51 of 2007).
Yours faithfully
(G.Padmanabhan)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/123 · issued 14 Aug 2009. The plain-English explanation above is BankPulse’s own independent summary.
If you plan to issue mobile-based semi-closed prepaid instruments, apply for authorization from RBI's Department of Payment and Settlement Systems.
💻 IT / Systems
Update your risk management processes and include them in your authorization application.
📜 Compliance
Review your existing prepaid payment instrument offerings to ensure compliance with the updated guidelines, especially KYC/AML/CFT norms.
Ensure that any mobile prepaid instruments you issue do not exceed Rs 5,000 and prohibit airtime conversion and person-to-person transfers.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Compliance officer at a bank this circular applies to (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), your first concrete step on “RBI allows non-bank entities to issue mobile prepaid instruments” is: “Review your existing prepaid payment instrument offerings to ensure compliance with the updated guidelines, especially KYC/AML/CFT norms.” (RBI issued this 14 Aug 2009).
Circular: RBI/2009-10/123 -- RBI allows non-bank entities to issue mobile prepaid instruments
Issued: 14 Aug 2009
Action required: Review your existing prepaid payment instrument offerings to ensure compliance with the updated guidelines, especially KYC/AML/CFT norms.
Action required: If you plan to issue mobile-based semi-closed prepaid instruments, apply for authorization from RBI's Department of Payment and Settlement Systems.
Action required: Ensure that any mobile prepaid instruments you issue do not exceed Rs 5,000 and prohibit airtime conversion and person-to-person transfers.
Action required: Update your risk management processes and include them in your authorization application.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5216&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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