Treat Full KYC-Verified PPIs At Par With Bank Accounts: Payments Council To RBI

The Payments Council of India (PCI) has reportedly urged the Reserve Bank of India (RBI) to treat prepaid payment instruments (PPIs) which are completely know your customer (KYC)-verified at par with bank accounts.

In a letter, accessed by Moneycontrol, the PCI also requested the bank to allow non-revolving credit lines in full KYC-verified PPIs such as e-wallets and prepaid cards. 

Non-revolving credit line is a one-time arrangement that cannot be used again once it is paid off. The credit line can only be replenished after the customer is underwritten again for a new loan. 

“This will allow that a loan (given by a regulated lender) can be disbursed by the lender into a full KYC PPI account,” the PCI was quoted as saying.

The letter also noted that there are multiple use cases for such financial products, adding that they have reduced the cost of credit for customers. 

The PCI represents the various regulated non-banking payment industry players in the country and takes up industry level issues.

The development comes barely a day after many industry bodies, including the PCI, met RBI officials and sought a six-month extension to comply with the contentious mandate for non-banking PPIs. 

The central bank had clarified that non-bank PPIs such as e-wallets and prepaid cards cannot be loaded with credit lines. 

It also said that PPI-MD would “allow these instruments only if they are “loaded/reloaded by cash, debit to a bank account, credit and debit cards, PPIs (as permitted from time to time) and other payment instruments issued by regulated entities in India and shall be in INR only”.

The notification left non-bank PPI players in ambiguity, with many unsure of what it meant for the industry. 

Inc42 previously reported that the country’s top fintech players and industry bodies had banded together to petition the government and its different arms to seek more clarity on the matter .

Even as fintech players continue to evaluate the order, the notification has cast a pall of gloom over the space as it raises questions on the business models of many of the players. 

As soon as the notification came out, many fintech players including Jupiter, EarlySalary and KreditBee terminated all customer transactions on their prepaid cards. There is no clarity yet on when these services will be restored. 

According to the PCI’s letter, there are more than 10 Mn credit-linked prepaid instruments currently active in the country, with over INR 3,500 Cr worth of payment volumes processed in May 2022.

Of these, 9.1 Mn million prepaid cards are estimated to be active for just seven players – RBL Bank, ICICI Bank, SBM Bank, Fino Payment Bank, Transcorp, Ola Money and Livquik.

India’s total addressable fintech market is projected to reach $1.3 Tn by 2025. Of this, the BNPL segment is expected to account for $43 Bn, growing 11X by 2025.