Financial Services

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

Dr Srinath Sridharan

November 06, 2024 | 7 Min Read

As RBI issues more digital wallet licenses to new players, a lack of a long-term regulatory vision and questions over the business viability of wallets cloud the future of India's PPI sector.

Key Takeaways

Initially introduced with cautious guidelines, the PPI framework was aimed at encouraging cashless transactions
Over the years, however, the RBI’s stance on PPIs has shifted frequently, leaving companies and consumers grappling with regulatory unpredictability
RBI’s recent move to issue PPI licences to new entrants such as Adani Pay, Jupiter, Tata Pay, and others appears to signal its commitment to the revival of PPIs
Is this renewed push for PPI licences truly part of a cohesive policy vision or simply a response to the growing digital economy?

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.

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