RBI broadens scope of prepaid payment instruments

The Reserve Bank of India has broadened the scope of prepaid payment instruments issued by bank and non-bank entities.

In a notification, the central bank said semi-closed system payment instruments can also be used for payment of college fees, school fees, and government taxes up to a limit of Rs 10,000.

Know your customer

Hitherto, these instruments could be used only to pay utility bills and for payments related to essential services, as also to book tickets for air and train travel.

The RBI, in its latest notification, said these instruments can be issued without separate know-your-customer due diligence procedures being undertaken by the issuer.

Semi-closed system payment instruments are redeemable at a group of clearly identified merchant locations or establishments which contract specifically with the issuer to accept the payment instrument.

These instruments do not permit cash withdrawal or redemption by the holder. The RBI has also doubled the limit for issue of semi-closed prepaid payment instruments to Rs 2,000 against any identity document furnished by the customer.

This is, however, subject to reporting of annual turnover/suspicious transactions.

Doubled limit

The central bank has asked issuers of the instruments to ensure that under no circumstances is more than one active instrument issued to the same holder by the same issuer.

The scope of the prepaid payment instruments has been broadened after a review of the way the issuance and acceptance market has developed, the RBI said.