Current · Source: Reserve Bank of India · RBI/2012-13/230 · issued 01 Oct 2012 · ~2 min read
Quick answerRBI replaces five semi-closed PPI categories with three, based on value limits and KYC levels. Non-bank issuers must credit escrow accounts immediately upon sale and maintain balances covering all outstanding PPI and merchant obligations. Domestic money transfer relaxations now apply to all three new PPI categories.
The rule, in the simplest words
There are now only 3 types of semi-closed prepaid cards (cards you load money onto before using): up to ₹10,000 with just basic details (electronic only, can add money up to ₹10,000 per month), ₹10,001 to ₹50,000 with an official ID (electronic only, cannot add more money), and up to ₹50,000 with full KYC (know your customer – full identity check) (can add money).
Non-bank companies that sell these cards must put the money from every sale into a special bank account (escrow account) right away, and that account must always have enough money to cover all card balances and payments owed to shops.
The relaxed rules for sending money within India (domestic money transfer) now apply to all 3 new card types, not just some.
How it plays out — a real example
A KYC & compliance officer in Indore, Priya, sells a ₹5,000 prepaid card to a customer who gives only her name and phone number. Priya immediately transfers the ₹5,000 into the company's escrow account at the bank, and later checks that the escrow balance is enough to cover all cards sold and payments due to local merchants.
What changed
The earlier five categories of semi-closed prepaid payment instruments have been consolidated into three: up to Rs 10,000 with minimal details (electronic only, reloadable up to Rs 10,000/month), Rs 10,001–Rs 50,000 with an officially valid document (electronic only, non-reloadable), and up to Rs 50,000 with full KYC (reloadable). Escrow management is tightened: non-bank issuers must credit the escrow account immediately upon sale, and balances must be sufficient to cover all outstanding PPI balances and merchant obligations. Domestic money transfer relaxations, previously limited, now extend to all three new PPI categories.
What it means for you
Banks and non-bank issuers must update their PPI product structures and KYC processes to align with the simplified three-tier framework. The stricter escrow rules increase operational discipline for non-bank entities, requiring real-time fund movement and ongoing balance adequacy checks. The expanded domestic money transfer facility could boost PPI usage for remittances, but issuers must ensure compliance with existing conditions from the October 2011 guidelines.
What you must do
Reclassify existing semi-closed PPIs into the three new categories based on value limits and KYC requirements.
Update system processes to ensure escrow accounts are credited immediately upon PPI sale by issuer, agent, or distributor.
Monitor escrow balances to ensure they cover all outstanding PPI balances and merchant obligations at all times.
Review domestic money transfer offerings to enable transfers from all three new PPI categories, subject to October 2011 conditions.
Train compliance and operations teams on the revised categorisation and escrow rules.
Who it affects
Non-bank PPI issuers, Scheduled commercial banks maintaining escrow accounts for PPI issuers, System providers and participants in payment systems, Merchants accepting PPIs, End-users of prepaid payment instruments
❓ Common questions
What are the three new categories of semi-closed PPIs?
Category 1: Up to Rs 10,000 with minimal customer details, electronic only, reloadable up to Rs 10,000/month. Category 2: Rs 10,001–Rs 50,000 with an officially valid document, electronic only, non-reloadable. Category 3: Up to Rs 50,000 with full KYC, reloadable.
How does the escrow management requirement change?
Non-bank issuers must credit the escrow account immediately upon sale of a PPI by the issuer, agent, or distributor. The escrow balance must always be adequate to cover all outstanding PPI balances and merchant obligations.
Can all new PPI categories be used for domestic money transfer?
Yes, all three categories now qualify for domestic money transfer, subject to the conditions in the October 5, 2011 guidelines, including limits on transfers to bank accounts.
📜 Read the original circular — full text as issued by RBI
RBI/2012-13/230
DPSS.CO.PD.No.560/02.14.006/2012-13
October 01, 2012
All System Providers, System Participants
and all other prospective prepaid payment instrument issuers
Dear Sir,
Policy Guidelines for issuance and operation of Prepaid Payment Instruments in India- Amendments
A reference is invited to our circulars RBI/2008-09/458 DPSS. CO. PD. No. 1873/02.14.06/2008-09 dated April 27, 2009 ; RBI/2009-10/123 DPSS.CO.PD.No.344/02.14.06/2009-10 dated August 14, 2009 ; RBI / 2010-11 / 261 DPSS. CO. No. 1041/02.14.006/2010-2011 dated November 04, 2010 ; RBI/2010-11/289 DPSS.CO.AD.No.780/02.27.004/2010-11 dated November 24, 2010 ; RBI/2010-11/341 DPSS.CO.OSD.No.1445/06.12.001/2010-11 dated December 27, 2010 ; RBI/2010-11/444 DPSS No.2174/02.14.004/2010-11 dated March 23, 2011 ; RBI/2010-11/512 DPSS.CO.No.2501/02.14.06/2010-11 dated May 4, 2011 ; RBI / 2011-12 / 144 DPSS. CO. PD. No. 225/02.14.006/2011-12 dated August 04, 2011 , RBI/2011-12/601 DPSS.CO.PD. No. 2256 /02.14.006/ 2011-12 dated June 14, 2012 on the captioned subject.
2. Attention is also invited to our guidelines RBI/2011-12/213 DPSS.PD.CO.No.62/02.27.019/2011-2012 dated October 05, 2011 issued on Domestic Money Transfer-Relaxations.
3. On a review the Reserve Bank has considered it necessary to carry out the following amendments:
A. Rationalisation in the categorisation and value limits of PPIs
The five categories of semi-closed PPIs as indicated in our previous guidelines have been replaced with three broad categories as under:
Semi-closed system prepaid payment instruments can be issued upto Rs.10,000/- by accepting minimum details of the customer provided the amount outstanding at any point of time does not exceed Rs 10,000/- and the total value of reloads during any given month also does not exceed Rs 10,000/-. These can be issued only in electronic form;
Semi-closed system prepaid payment instruments can be issued from Rs.10,001/- to Rs.50,000/- by accepting any ‘officially valid document’ defined under Rule 2(d) of the Prevention of Money Laundering Act. Such PPIs can be issued only in an electronic form and should be non-reloadable in nature;
Semi-closed system prepaid payment instruments can be issued upto Rs.50,000/- with full KYC and can be reloadable in nature.
B. Strengthening Escrow management
The non-bank entities issuing prepaid payment instruments are required to maintain the outstanding balance in an escrow account with any scheduled commercial bank subject to the conditions stipulated in the guidelines dated April 27, 2009 and November 24, 2010.
It is advised that the escrow account should be credited immediately as and when the issuer/agent/distributor sells a PPI to the end-user. Further, the balances in the escrow account should be adequate to cover the outstanding balances on the PPIs with end-users and the obligations to merchants arising out of the usage of the PPIs by the end-users at any given point of time.
C. Domestic Money Transfer relaxations
In terms of the guidelines dated October 05, 2011,domestic fund transfer is permissible: (i) from a prepaid payment instrument to another prepaid payment instrument issued by the same issuer; and (ii) from a prepaid payment instrument issued with full KYC to a bank account up to Rs 5000/- with a monthly ceiling of Rs 25,000/- per remitter. In view of the amendments indicated at Para 3A above, it has been decided that all the three categories of prepaid payment instruments mentioned therein will now qualify for domestic money transfer. The other conditions as indicated in the guidelines dated October 05, 2011 will continue to prevail.
4. This directive is issued under section 18, of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and comes into effect from the date of issue.
5. Please acknowledge receipt.
Yours faithfully
(Vijay Chugh)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2012-13/230 · issued 01 Oct 2012. The plain-English explanation above is BankPulse’s own independent summary.
Train compliance and operations teams on the revised categorisation and escrow rules.
💻 IT / Systems
Update system processes to ensure escrow accounts are credited immediately upon PPI sale by issuer, agent, or distributor.
📜 Compliance
Reclassify existing semi-closed PPIs into the three new categories based on value limits and KYC requirements.
Monitor escrow balances to ensure they cover all outstanding PPI balances and merchant obligations at all times.
Review domestic money transfer offerings to enable transfers from all three new PPI categories, subject to October 2011 conditions.
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 (Non-bank PPI issuers, Scheduled commercial banks maintaining escrow accounts for PPI issuers, System providers and participants in payment systems, Merchants accepting PPIs, End-users of prepaid payment instruments), your first concrete step on “RBI Overhauls Prepaid Payment Instrument Rules: New Categories & Escrow Norms” is: “Reclassify existing semi-closed PPIs into the three new categories based on value limits and KYC requirements.” (RBI issued this 01 Oct 2012).
Action required: Reclassify existing semi-closed PPIs into the three new categories based on value limits and KYC requirements.
Action required: Update system processes to ensure escrow accounts are credited immediately upon PPI sale by issuer, agent, or distributor.
Action required: Monitor escrow balances to ensure they cover all outstanding PPI balances and merchant obligations at all times.
Action required: Review domestic money transfer offerings to enable transfers from all three new PPI categories, subject to October 2011 conditions.
Action required: Train compliance and operations teams on the revised categorisation and escrow rules.
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=7597&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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