Prepaid Payment Instrument

  • Well Qualified Team
  • Fast & Quick Process
  • Free Consultations Lifetime
  • Lowest Price
  • 100% Customer Satisfaction

Apply Now!

Apply Now!

Prepaid Payment Instrument

Out of the many Prepaid Payment Instruments, or PPIs – as they are also referred to, being launched in the market corresponding to an increase in digital transactions, some of the famous ones are E-Wallet and Payment Application for Mobile Users.
PPIs are payment instruments facilitating the purchase of goods and services, including funds transfer, financial services, remittance facilities, etc., against the amount stored on such instruments. The amount stored on such instruments includes the value paid for by the holders by

  • cash,
  • debit from a bank account, or
  • by credit card payment.

PPI, in simple words, is an E-wallet. You add money to it with the help of your merchant service provider. And use this money for the services available. Such as Mobile Recharge, Online Booking for Movie, Online Bill payment, and so on. While some PPIs also provide a facility to pay a third party or merchant store offline. Many companies in India have already launched this type of e-wallet. For instance PayTM, Airtel Money, Bhim App, etc.
PPIs have emerged as a convenient & portable method of initiating cashless transactions, especially since the currency change of 2016, during which the country experienced a lot of cash crunch.
It is an effective way of bringing transparent, scalable and accountable payments.

Types of Prepaid Payment Instruments

We can categorise the e-wallet according to the facilities they provide. There are 3-types of wallets prescribed in India as per RBI Guidelines.

Open Wallets

This is the kind of PPI that facilitates customers to keep money in this wallet and use this money anytime, anywhere. So by using this wallet, you can pay online for any purchase of goods & services and withdrawals at ATMs are also possible. Customers can use this money anytime and anywhere.
This type of wallet also permits purchase of financial services such as funds transfer at merchant locations. All Visa and Master Cards fall into this section. Only banks are empowered to issue and administer open-wallets. An example in India is M-Pesa by Vodafone India Ltd in alliance with ICICI Bank Ltd.

Closed Prepaid Payment Instruments or Wallets

A Closed Wallet is issued by a company or establishment to enable its user to purchase goods & services exclusively from that company. These PPIs do not allow cash withdrawal or making payments at other merchant locations. Such as Airtel money, earlier allowed only for paying bills of or recharging Airtel numbers.
Other entities that may issue these are individuals, sole-proprietorships, partnership firms, etc. As they cannot be used for payments and settlement for third party transactions, their issuance and operation do not require approval by RBI.

Semi-Closed PPIs or Wallets

These wallets can be used for purchasing goods or services from certain identified and exclusive merchant locations or establishments, only, which are in contract with the issuer to accept the wallet payments, including financial services. Cash withdrawals and redemptions are not allowed with them either. An example is the Citrus Cash App.
Entities including NBFCs and individuals are permitted to carry on the business of semi-closed wallets after getting a license from RBI.

Minimum Capital Required to Start E-Wallet

  • For Banks: No separate capital requirement has been specified for Licensed/Scheduled Banks or NBFCs registered with RBI. They need to take approval from RBI for authorization to issue the PPI.

  • For other entities: A minimum net worth capital of Rs. 25 crores as per the last audited Balance Sheet shall be maintained by all entities seeking approval from RBI to start a Prepaid Payment Instrument Business.

  • The Net Worth Capital, here, consists of the following:

    • Paid-up Equity capital,
    • Free Reserves,
    • Preference shares,
    • Share premium account, and
    • Capital reserves representing surplus.

Other Conditions

  • Only an entity established under the Companies Act of India, are authorized to apply for the license from RBI.
  • For newly incorporated companies, a certificate from their Chartered Accountant about the current net worth with a copy of the provisional balance sheet shall be submitted. Moreover, the documents regarding capital infusion & other funds obtained to commence the business are also be submitted.
  • For Banks and NBFCs, the approval is granted by the Supervisory Department of the RBI.
  • All existing PPI issuers who have a license from RBI under previous capital requirements are required to increase their net-worth to the present criteria by September 30, 2020, failing which their license shall be cancelled.
  • The object clause of the MOA of the applicant must specify the proposed activity of operating as an E-Wallet issuer.

Process for Non-Bank Entities

  • The non-bank entity shall apply to seek approval for the license in Form-A as prescribed under Regulation 3(2) of the Payment and Settlement System Regulations, 2008.

  • RBI, at first, judges the prima-facie eligibility of the applicant with preliminary screening.

  • Next, the “fit and proper” situation of the applicant and its management is assessed. Including taking feedbacks from regulators, government authorities, etc.

  • If the eligibility criteria are not met, the application shall be returned without a refund of the fees.

  • Other than the eligibility criteria, the application shall also be assessed on other grounds. Such as customer service and efficiency, technical and related requirements.

  • Once all conditions have been fulfilled, the in-principal approval is granted by RBI, which has a validity of 6-months. The entity is required to submit a satisfactory System Audit Report, within this period. Failing which, the in-principle approval shall lapse automatically.

  • The entities which have been granted final approval are to commence their operations within 6-months of the approval. Else the authorization shall lapse automatically. There is a provision of a one-time extension of 6-months by a written request in advance to RBI giving valid reasons. RBI reserves the right to accept or reject this application for extension.

  • The Certificate of Authorization is valid for 5-years from the date of its grant.

  • The license needs to be renewed by applying to RBI 3-months prior to its expiry. If not applied for renewal in time, RBI reserves the right to accept or reject such application.

Prior Written Permission by Non-Bank entities

All non-bank entities being granted the Certificate of Authorization to issue PPIs in the country are required to take written approval from RBI in the following situations:

Any takeover or acquisition of control of a non-bank entity, which may or may not result due to a change of management.

Any change in the management of the non-bank entity, due to the change in more than 30% of the directors (excluding independent directors). Prior approval from RBI is not required for those directors who get re-elected on retirement by rotation.

Deployment of Money Collected on PPIs

The funds collected by issuing e-wallets at any point in time would be significant. Moreover, its revenue would also be speedy. If the settlement of funds is certain and on time, the goodwill and trust in the e-wallet system would increase rapidly. To ensure that the settlement is made on time, the issuers are to invest the funds collected only from the issuance of e-wallets in the following way:
The outstanding balance is to be kept as part of “net demand and time liabilities” for maintaining the reserves in the Balance Sheet, to be calculated based on the balances appearing in the accounts of the bank as on the date of reporting to RBI:

Any other entity or persons issuing e-wallets shall keep the outstanding balance reserved in an escrow account with any scheduled bank subject to the following criteria:

  • The account to be maintained with only one bank at one time,
  • If the escrow account is being transferred from one bank to another, the point to remember is that the process is completed in a within a certain time and without affecting the payment cycles,
  • The balance remaining in the account shall always be same as or more than the value of outstanding PPIs and payments due to merchants
  • The amount balance in the account is to be used only for paying the partaking merchant establishments and other permitted payments.

Validity of PPI License

All licenses issued to the PPI issuers by RBI have a minimum validity of 1-year from its issue date to the PPI holder. The users must be intimated well in time by PPI issuers about the expiry of their PPIs by SMS/e-mail/post or by any other means in the language preferred by the user, chosen at the time of issuance of the PPI. Even if the PPI expires, a grace period of minimum 60-days to be given by the PPI issuer to the customer.

Transactions Across Borders

Entities or individuals authorized under FEMA to issue the Foreign Exchange denominated Prepaid Payment Instruments do not need to comply with the provisions of PPI guidelines as per RBI notification. The transaction limit is set for a maximum of Rs. 5000/- for such cross border transactions.

Documents Required For Prepaid Wallet License

RBI states a comprehensive list of documents for a company to register itself as CIC. Only some of them can be listed here, as RBI may ask for other documents, as it considers necessary.

  • Name of applicant
  • Constitution of applicant
  • Address proof of registered office
  • Certificate of Incorporation (CoI)
  • Memorandum of Association (MoA)
  • Management information
  • Declaration from Statutory auditor
  • Audited balance sheet
  • Name and address of bankers
  • Any other documents as may be required.

Why Choose Legal Raasta

30+ Offices in India
10+ Years Experience
Economical and Fast
Money Back Guarantee



    One can store money in PPIs after registering with the service provider. And make online or offline payments to merchants associated with the said service provider, against the value stored on such instruments. They are also called mobile wallets, m-wallets, e-wallets or digital wallets. You can use them to pay your mobile, electricity, other utility bills and shop for groceries, clothing and much more from the registered merchants.

    A company registered under the Companies Act, 1956 or 2013, of India, can issue and operate PPIs after receiving authorisation from RBI.

    PPIs in India are classified under 3-types.
    (i) Closed System PPIs: Issued by an entity for facilitating the purchase of goods & services from that entity only. No cash withdrawals permitted. Because these instruments cannot be used to pay or settle goods/services from 3rd parties, their issuance and operation are not classified as payment system requiring approval/authorisation by RBI.(ii) Semi-closed System PPIs: Issued by banks (approved by RBI) and non-banks (authorized by RBI) for buying goods & services, including financial services, or remittance facilities, etc., at a group of clearly identified merchant locations/establishments in contract with the issuer (or contract through a payment aggregator/payment gateway) to accept the payments from PPIs. No cash withdrawal permitted, even if they are issued by banks or non-banks.
    (iii) Open System PPIs: Issued only by banks (approved by RBI) and used at any merchant for purchase of goods & services. Remittance facilities, cash withdrawal at ATMs/Points of Sale (PoS) terminals/Business Correspondents (BCs) are also allowed.

    An entity participating in a payment system for issuing PPIs to individuals/entities. The money collected under this is used by the entity to pay the merchants who are part of the acceptance arrangement and for facilitating funds transfer/remittance services.

    The holder is an individual/organization who obtains PPI from the PPI issuer and uses the same for the purchase of goods & services. In case of a Gift PPI, the targeted beneficiary (not the purchaser) is the holder.

    Yes. Cash addition up to Rs. 50,000/- per month is permitted, subject to the overall limit of the PPI. The limit via electronic/online payment is subject to the overall limit of the PPI.


LegalRaasta was founded on the principle that sophisticated legal and taxation services should be simple, modern, and inexpensive. We can serve our clients more efficiently thanks to cutting-edge practise technology.

By continuing past this page, you agree to our Terms and Conditions Privacy Policy and Refund Policy | Copyright © 2015-2023| All Rights Reserved