UCBs Allowed Semi-Closed Prepaid Payment Instruments Up to ₹10,000
Current · Source: Reserve Bank of India · RBI/2013-14/607 · issued 27 May 2014 · ~1 min read
Quick answerRBI now permits UCBs that already have ATMs and ATM-cum-debit cards to issue semi-closed prepaid payment instruments up to ₹10,000 for utility bill/ essential services, redeemable only at contracted merchant locations, with no cash withdrawal allowed.
The rule, in the simplest words
Only UCBs (Urban Co-operative Banks) that already have ATMs and ATM-cum-debit cards can offer this new service.
The prepaid card can hold up to ₹10,000 and can only be used to pay for utility bills (like electricity or water) or essential services.
You can only use this card at specific shops or places that have a contract with the bank—not anywhere else.
You cannot take out cash from this card or get your money back in cash; it's only for paying bills or services.
The bank must follow all RBI rules about prepaid payment instruments, including the ones from 2009 and any newer updates.
How it plays out — a real example
Ravi, a co-operative bank branch officer in Indore, helps his UCB issue semi-closed prepaid cards to customers. He explains to a customer that the ₹5,000 card can only be used at the contracted grocery store and electricity office, not for cash withdrawal. Ravi ensures the merchant contracts are signed before the cards are activated, following RBI rules exactly.
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
❓ Common questions
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.
📜 Read the original circular — full text as issued by RBI
RBI/2013-14/607
UBD.CO.BPD.PCB.Cir. No. 65/09.69.000/2013-14
May 27, 2014
The Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Dear Sir / Madam,
Issue of Pre-paid Payment Instruments-UCBs
Please refer to circular UBD (PCB) BPD Cir No.50/09.69.000/2005-06 dated April 28, 2006 permitting Urban Cooperative Banks (UCBs) to install ATMs and issue ATM-cum-Debit Cards.
2. We have been receiving requests from a few UCBs to allow them to undertake Credit / Pre-paid Card business. Taking into account the business profile of UCBs and the nature of risks associated with Credit/ Pre-paid Card business, it has been decided that UCBs which have installed ATMs and issued ATM-cum-Debit Cards may introduce ‘Semi-Closed Pre-paid Payment Instruments’ permitting payment of utility bill/ essential services up to a limit of ` 10,000/-. These payment instruments shall be redeemable at a group of clearly identified merchant locations/ establishments which enter into contracts specifically with the UCB to accept the payment instruments. These instruments shall not permit cash withdrawal or redemption by the holder.
3. The issuance and operations of these instruments shall be guided by the instructions contained in circular DPSS.CO.PD.No.1873/ 02.14.06/2008-09 dated April 27, 2009 and any other circular/ instructions issued in this regard from time to time by the Department of Payment and Settlement Systems, Reserve Bank of India.
Yours faithfully,
(P K Arora)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2013-14/607 · issued 27 May 2014. The plain-English explanation above is BankPulse’s own independent summary.
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.
📜 Compliance
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.
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 (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), your first concrete step on “UCBs Allowed Semi-Closed Prepaid Payment Instruments Up to ₹10,000” is: “Ensure your UCB already has ATMs and ATM-cum-debit cards issued before applying for this facility.” (RBI issued this 27 May 2014).
Circular: RBI/2013-14/607 -- UCBs Allowed Semi-Closed Prepaid Payment Instruments Up to ₹10,000
Issued: 27 May 2014
Action required: Ensure your UCB already has ATMs and ATM-cum-debit cards issued before applying for this facility.
Action required: Set up contracts with clearly identified merchant locations for redemption of these instruments.
Action required: Adhere to the ₹10,000 per instrument limit and prohibit cash withdrawal or redemption.
Action required: 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.
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=8900&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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