RBI seeks to raise entry barriers, tighten controls for mobile wallets, gift cards

RBI’s draft norms mandate non-bank prepaid instrument issuers, such as mobile wallets, to have a minimum net worth of Rs25 crore, up from Rs1 crore now


Existing non-bank PPI issuers shall also have to comply with the enhanced capital requirements by 30 September 2020, according to RBI’s draft guidelines. Photo: Bloomberg
Existing non-bank PPI issuers shall also have to comply with the enhanced capital requirements by 30 September 2020, according to RBI’s draft guidelines. Photo: Bloomberg

Mumbai: The Reserve Bank of India (RBI) on Monday proposed to raise the entry barrier for prepaid instrument (PPI) issuers such as mobile wallet and gift card companies by seeking a higher positive net worth.

According to draft guidelines the banking regulator released on its website, non-bank PPI issuers will need to have a minimum positive net worth of Rs25 crore, as compared to the existing minimum of Rs1 crore.

Net worth will consist of “paid-up equity capital, preference shares which are compulsorily convertible into equity capital, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of assets but not reserves created by revaluation of assets adjusted for accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any,” RBI said.

Existing non-bank PPI issuers shall also comply with the enhanced capital requirements by 30 September 2020 for the financial position as of 31 March 2020, failing which they shall not be permitted to carry on business beyond 31 December 2020, the regulator added.

“The growing usage of PPIs for purchase of goods and services as well as funds transfer has led to the requests from stakeholders and other entities for relaxations in certain areas while strengthening the norms for safety and security, risk mitigation and customer protection aspects related to usage of PPIs,” the central bank said in a statement.

The draft guidelines propose tougher controls over PPI issuers and seek higher accountability in terms of cross-border transactions, know-your-customer (KYC) norms, anti-money laundering norms and reporting to the regulator in times of any significant changes in the control of the firms or cases of fraud.

Cash loading to PPIs shall be limited to Rs50,000 per month subject to overall limit of the PPI where full KYC of a customer is obtained, the RBI said. In case of PPIs with minimum KYC, this monthly limit would be set at Rs20,000. For PPI accounts with electronic KYC like one-time passwords, the minimum limit has been set at Rs10,000.

“The PPIs may be issued as smart cards, magnetic stripe cards, Internet wallets, mobile wallets, and any such form / instrument which can be used to access the PPI and to use the amount therein,” the regulator said. PPIs in the form of paper vouchers shall no longer be issued from the date of the final directions. The regulator has asked stakeholders to send their comments on the draft guidelines by 31 March.

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