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Thursday, September 13, 2012

Prepaid payment instruments yet to pick up: RBI

Growth of prepaid payment instruments (PPIs) continues to be sluggish though non-bank entities also can issue them, said G. Padmanabhan, Executive Director, Reserve Bank of India.

PPIs allow 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 issuance of PPIs during the year averaged 48.96 million, with a peak issuance of 57.46 million in July 2011.

“The volume of transactions (2.3 per cent) and value transacted (2.5 per cent) with PPIs as a percentage of total card transactions is also very marginal,” said Padmanabhan at an event organised by the Internet and Mobile Association of India (IAMAI) here.

Pointing out that paper vouchers like gift vouchers account for about three-fourths of the PPIs, Padmanabhan said “What is the innovation that has taken place if paper PPIs are merely acting as a substitute for cash?” He urged the industry to create more awareness on the benefits of using a PPI.

He asked the seminar participants to explore the possibility of PPI issuers working as business correspondents (BCs) with banks and load government disbursements onto the PPIs, which in turn would lead to promoting inclusion through electronic payments.

The access and inclusion concerns are far greater in semi-urban and rural areas. Most issuers are geographically restricted. In this context, Padmanabhan said there may be a need to review the entry norms so that only serious players come in.

KYC Norms

It is believed that embracing electronic payment systems will provide critical trails of transactions. This will aid in Anti-Money Laundering (AML) and Combating of Financing of Terrorism (CFT) efforts. “However, we have observed that there is no proper system to track card issuance let alone system for tracing the transaction trails,” he said.

There have been demands for increasing the transaction limits.

This will need to be increased in keeping with the safety and security of transactions as applicable to other card schemes, he said.

The RBI is in the process of finalising a payment system ‘vision’ document after taking into consideration views from the stakeholders and the industry.


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