Prepaid instruments from banks, non-banks can be used to pay for public transport systems: RBI

Prepaid payment instruments (PPIs) managed by both banks and non-banking institutions can now be used to make payments for public transport systems, the Reserve Bank of India (RBI) announced on Friday.

“Public transport systems across the country cater to a multitude of commuters on a daily basis. To provide convenience, speed, affordability, and safety of digital modes of payment to commuters for transit services, it has been decided to permit authorised bank and non-bank PPI issuers to issue PPIs for making payments across various public transport systems,” the RBI said in a notification.

The instructions come into effect immediately, the central bank added.

What are prepaid payment instruments?
In 2021, RBI issued ‘Master Directions’ on PPIs. As per these, PPIs are ‘instruments that facilitate the purchase of goods and services, financial services, remittance facilities, etc., against the value stored within.’

Instruments that need RBI’s approval/authorisation before being issued are classified under two categories: small, and full -KYC.

Small PPIs are financial tools administered by banking and non-banking bodies upon submission of basic information by the holder. These are exclusively deployed for procuring goods and services without the option for fund transfer or cash withdrawal.

Full-KYC (Know Your Customer) PPIs, on the other hand, are distributed by comparable institutions following a substantive KYC process involving the holder. Unlike their small counterparts, however, these permit fund transfer and cash withdrawal, in addition to catering to purchasing goods.