Prepaid payment instruments
Also called: PPI · Topic: Payment Systems and Digital Finance · NCERT: Beyond NCERT
Meaning
Prepaid payment instruments (PPIs) are payment tools, such as e-wallets and prepaid cards, that are loaded with money in advance. You then use that stored value for purchases and transfers. RBI regulates them under its PPI Master Direction (2021):
- Small PPIs need only minimum KYC (identity checks) and have low limits.
- Full-KYC PPIs can hold up to ₹2 lakh. They must be interoperable with UPI and card networks, and cash withdrawal is allowed within limits.
In 2022, RBI barred loading PPIs from credit lines. Since 2023, merchant UPI payments above ₹2,000 made from PPIs carry an interchange fee of up to 1.1%. Large merchants pay this fee, not customers.
Example
A company gives its staff prepaid meal cards loaded with ₹2,000 each month. Employees pay at canteens and food outlets using this stored value.
Don't confuse with
- Debit card: a debit card draws on your bank deposit. A PPI can spend only the value already loaded into it.