RBI Expands UPI Access: Prepaid Payment Instruments Now Enabled for Third-Party Apps

The Reserve Bank of India (RBI) has announced a policy expansion that enables Prepaid Payment Instruments (PPIs) like gift cards, metro rail cards, and digital wallets to integrate with the Unified Payments Interface (UPI) through third-party applications. The expansion extends UPI functionality beyond traditional bank accounts to various prepaid payment tools, building on RBI’s ongoing efforts to strengthen India’s digital payment infrastructure.

The new policy specifically applies to PPIs that have completed full Know Your Customer (KYC) compliance. Under the framework, PPI issuers must enable their full-KYC PPI holders to conduct UPI payments by linking their prepaid instruments to UPI handles. When users make transactions through the issuer’s own application, authentication will occur using existing PPI credentials.

For transactions conducted through third-party applications, the system will use UPI credentials for authentication, maintaining consistency with current security protocols. The authentication approach matches established industry standards for secure digital transactions, which increasingly emphasize robust user verification methods. The RBI has established that PPI-based UPI transactions will operate under the same transaction limits as traditional bank-linked UPI accounts.

“A PPI issuer shall enable holders of only its full-KYC PPIs to make UPI payments by linking its customer PPIs to its UPI handle,” the RBI’s circular states. “UPI transactions from PPI on the issuer’s application shall be authenticated using the customer’s existing PPI credentials.”

The implementation requires PPI providers to maintain strict KYC compliance standards and clearly communicate any associated transaction fees to users. The initiative builds upon the RBI’s initial proposal from April 2024, which sought to enhance interoperability in India’s digital payments ecosystem. The move follows India’s successful expansion of UPI beyond its borders, as demonstrated by the recent implementation of UPI support in the United Arab Emirates.

The integration enables PPI users to conduct transactions using UPI IDs linked to their wallets through popular payment applications such as Google Pay, PhonePe, and Paytm without requiring a traditional bank account. The development represents a significant advancement in India’s digital payment infrastructure, which has seen progressive expansion since UPI’s introduction in 2016. The system now processes over 10 billion transactions monthly, making it one of the world’s most extensive real-time payment networks.

Sources: Pune Mirror, VARINDIA, CNBC TV18

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December 30, 2024 – by the ID Tech Editorial Team