Policy Guidelines for issuance and operation of Prepaid Payment Instruments in India – RBI instructions
Pre-paid payment instruments issued by banks and non-bank entities have been gaining popularity as a means of payment in India. In order to ensure an orderly development and operations of this product, Reserve Bank had placed the 'Approach Paper' on issuance and operation of ‘ prepaid payment instruments in India' on the RBI website for public comments on November 07, 2008. Based on the comments received from banks, existing issuers of pre-paid payment instruments, general public and a series of meetings with various stake holders, the draft guidelines was prepared by Reserve Bank and was also placed on the website for public comments. After taking into account further comments/suggestions received, Reserve Bank has finalised the ‘guidelines for prepaid payment instruments in India'.
Reserve Bank of India, has notified, the ‘Guidelines for Prepaid Payment Instruments in India' for the information of general public. All persons currently operating or proposing to operate such payment systems shall comply with the guidelines.
Pre-paid Payment Instruments: Pre-paid payment instruments are payment instruments that facilitate purchase of goods and services against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holder, by cash, by debit to a bank account, or by credit card.
The pre-paid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts, mobile wallets, paper vouchers and any such instruments which can be used to access the pre-paid amount (collectively called Payment Instruments hereafter).
The pre-paid payment instruments that can be issued in the country are classified under the three categories viz.
(i) Closed system payment instruments
(ii) Semi- Closed system payment instruments and
(iii) Open system payment instruments.
Closed System Payment Instruments: These are payment instruments issued by a person for facilitating the purchase of goods and services from him/it. These instruments do not permit cash withdrawal or redemption. As these systems do not facilitate payments and settlement for third party services, issue and operation of such instruments are not classified as payment systems.
Semi-Closed System Payment Instruments: These are payment instruments which are redeemable at a group of clearly identified merchant locations/ establishments which contract specifically with the issuer to accept the payment instrument. These instruments do not permit cash withdrawal or redemption by the holder.
Open System Payment Instruments: These are payment instruments which can be used for purchase of goods and services at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs.