The Reserve Bank of India (“RBI”) in exercise of powers conferred under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007, issued a circular, vide Circular No. RBI/2024-2025/97 CO.DPSS.POLC.No.S972/02-14-006/2024-25[1] dated December 27, 2024, regarding the permitted access of Unified Payments Interface (“UPI”) payments for Prepaid Payment Instruments (“PPI”) through third-party applications.
Currently, UPI payments from/ to PPIs can only be carried out using the mobile applications provided specifically by the PPI issuer. However, as announced in Statement on Development and Regulatory Policies, dated April 05, 2024, it has been decided to enable the PPI holders, who have completed their Know Your Customer (“KYC”) process, to make and receive UPI payments through the mobile application of third-party UPI applications.
Consequently, Clause 11.6.3 and Clause 11.6.4 of the Master Directions bearing no. CO.DPSS.POLC.No.S-479/02.14.006/2021-22, dated August 27, 2021 (“Master Directions”) on PPIs has been amended. Previously, the PPI holders were required to be onboarded by their own PPI issuer, who could only link customer wallets to the handle issued to it. Additionally, authentication for transactions was to be completed by the PPI holder’s existing wallet credentials, with the transaction being pre-approved before reaching the UPI system.
However, as per the revised instructions, a PPI issuer shall now enable holders of only its full-KYC PPIs to make UPI payments by linking the PPIs to its own UPI handle. The UPI transactions will continue to be authenticated using the PPI holder’s existing PPI credentials, ensuring that the transaction is pre-approved before it reaches the UPI system. A PPI issuer, acting as a Payment Service Provider (“PSP”), shall be prohibited from onboarding customers of other banks or PPI issuers. Furthermore, PPI issuers may also facilitate the discovery of their full-KYC PPIs on third-party UPI applications. These third-party applications shall then link the PPIs to their PSP handles, and UPI transactions from these PPIs will be authenticated using UPI credentials.
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