RBI’s Prepaid Payment Instrument policy—Striking a balance or stirring confusion?

The Reserve Bank of India’s (RBI) approach to regulating Prepaid Payment Instruments (PPIs) has profoundly influenced India’s digital payment landscape, but the journey has also exposed critical regulatory inconsistencies.

Since the introduction of PPIs in 2009, the RBI has gradually expanded its functionality—first, as a niche alternative to cash, and later, as a pillar in India’s digital payments ecosystem. By setting initial limits on stored value and mandating KYC norms, the RBI’s approach was cautious, reflecting a desire to manage risk in an underdeveloped market. 

However, with the growing success of mobile wallets and an accelerated shift to digital payments post-demonetisation in 2016, RBI’s approach pivoted as it recognised PPIs’ potential to drive financial inclusion among unbanked and underserved populations.