RBI proposes new prepaid card for transactions up to Rs 10,000

RBI plans to introduce a prepaid payment instrument that can be used for buying goods and services and making bill payments worth up to Rs 10,000.

The Reserve Bank of India (RBI) on Thursday proposed to introduce a prepaid payment instrument (PPI) that can be used for transactions of goods and services worth up to Rs 10,000.

PPIs have been playing an important role in promoting digital payments, and the new PPI will further facilitate their usage, an RBI statement issued post the monetary review on Thursday said.

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“To further facilitate its [PPIs'] usage, it is proposed to introduce a new type of PPI which can be used only for purchase of goods and services up to a limit of Rs 10,000,” the statement said.

The central bank said the loading and reloading of such PPIs can be done only from a bank account and they can used for making bill payments and merchant payments.

Such PPIs can be issued on the basis of essential minimum details sourced from the customer. The RBI said it would give instructions in this regard by December 31.

PPIs are instruments that facilitate purchase of goods and services, apart from financial services and remittance facilities, against the value stored on such instruments. These can be loaded and reloaded with cash, debit to a bank account, by credit card, or from other PPIs. They can be loaded with up to Rs 50,000 per month. As of now, banks and non-bank entities are permitted to issue and reload the PPIs.

There are currently three kinds of PPIs allowed by RBI —closed system PPIs, semi-closed system PPIs, and open system PPIs.

Changes in IBUs

The banking regulator also announced that it will allow the International Financial Service Centre Banking Units (IBUs) to open foreign currency current accounts of their corporate borrowers to facilitate ease of operations.

With regard to the liquidity coverage ratio, it has also allowed the IBUs to accept fixed deposits in foreign currency of less-than-one-year tenor from non-bank entities and consequently removed the current restriction on premature withdrawal of deposits.

“However, the current prohibition on acceptance of retail deposits including from high net worth individuals (HNIs) will continue. Necessary instructions are being issued shortly,” the RBI said.

The Reserve Bank has also put forth the reviewed foreign exchange hedging facilities, allowing users to undertake over the counter (OTC) currency derivative transactions up to $10 million, without the need to evidence underlying exposure.

“Banks shall be provided with the discretion, in exceptional circumstances, to pass on net gains on hedge transactions booked on anticipated exposures. Strengthening of the safeguards to ensure that complex derivatives are sold only to users that are capable of managing the risks,” the RBI said.

The final directions in this regard will be issued after notification of the changes to Foreign Exchange Management Act (FEMA) Regulations, the RBI said in the 'Statement on Developmental and Regulatory Policies' released on Thursday.

(Edited by Athirupa Geetha Manichandar)