What changed
Previously, UCBs were only allowed to install ATMs and issue ATM-cum-debit cards. Now, based on requests from some UCBs, RBI has decided to permit them to introduce semi-closed prepaid payment instruments for utility bill/ essential services, subject to a ₹10,000 limit and specific merchant contracts.
What it means for you
UCBs can now offer a limited prepaid card product to their customers, expanding their payment services beyond debit cards. However, the product is restricted to non-cash use at pre-contracted merchants, which limits risk but also limits revenue potential. Banks must ensure compliance with DPSS circulars on prepaid instruments.
What you must do
- Ensure your UCB already has ATMs and ATM-cum-debit cards issued before applying for this facility.
- Set up contracts with clearly identified merchant locations for redemption of these instruments.
- Adhere to the ₹10,000 per instrument limit and prohibit cash withdrawal or redemption.
- Follow all instructions from RBI's Department of Payment and Settlement Systems, including circular DPSS.CO.PD.No.1873/02.14.06/2008-09 and subsequent updates.
Who it affects
Primary (Urban) Co-operative Banks (UCBs) that have ATMs and ATM-cum-debit cards, Customers of eligible UCBs seeking prepaid payment options, Merchants entering contracts with UCBs for accepting these instruments
What is the maximum limit for these semi-closed prepaid instruments?
The limit is ₹10,000 per instrument, and it can only be used for utility bill/ essential services at contracted merchant locations.