The Reserve Bank of India on Friday permitted holders of prepaid payment instruments (PPIs) to conduct and receive Unified Payments Interface (UPI) transactions through third-party mobile applications. The central bank stated in its circular that “UPI payments from and to full-KYC PPIs will be allowed through third-party UPI applications.”
The key points of this decision include:
– A PPI issuer must allow only holders of its full-KYC PPIs to perform UPI transactions by linking their customer PPIs to its UPI handle.
– UPI transactions initiated from the PPI using the issuer’s application will be authenticated via the customer’s existing PPI credentials.
– These transactions will be pre-approved prior to entering the UPI system.
The RBI clarified that a PPI issuer, functioning as a payment system provider, is not permitted to onboard customers from any bank or other PPI issuers.
This step by the RBI is designed to enhance convenience for PPI holders, which include users of gift cards, metro rail cards, and digital wallets, among others. Currently, UPI transactions from or to a bank account can be executed via the UPI application of that particular bank or through any third-party application provider. However, UPI transactions involving a PPI are limited to the mobile applications offered by the PPI issuer.
UPI is a real-time instant payment system created by the National Payments Corporation of India, facilitating inter-bank transactions using mobile technology. PPIs serve as tools that enable the purchase of goods and services, execution of financial services, and provision of remittance facilities based on the stored value.
