RBI permits prepaid payment instruments to use third-party UPI apps for making payments

Post by : Dr. Amrinder Pal Singh

Photo : Moneycontrol

RBI MPC meeting: PPIs such as prepaid cards will be allowed to be linked to third-party UPI apps to provide greater convenience to users

In the latest RBI Monetary Policy Committee (MPC) meeting, Governor Shaktikanta Das announced a significant development regarding prepaid payment instruments (PPIs). These instruments, including prepaid cards, will now be permitted to integrate with third-party Unified Payments Interface (UPI) applications. This move aims to enhance user convenience by enabling PPI holders to make UPI payments directly through their prepaid instruments, similar to traditional bank account holders. While specific operational details are yet to be disclosed, this decision marks a significant step towards modernizing and simplifying digital payment methods in India.

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Prepaid payment instruments (PPIs) are financial tools that facilitate transactions using stored funds. Among these, prepaid cards stand out as versatile instruments that can be loaded with a predefined amount for various purposes. Currently, PPIs like prepaid cards are limited to using their issuer's proprietary app for UPI transactions. However, the RBI's proposal seeks to expand this capability by allowing prepaid cards to link with popular third-party UPI apps such as Google Pay, Amazon Pay, and PhonePe. This strategic move is poised to provide PPI users with enhanced payment flexibility and accessibility.

For instance, consider Pluxee meal cards, commonly issued by companies to employees for meal-related expenses. Presently, users are restricted to using the Pluxee app or physical card for transactions. With the forthcoming implementation of the RBI's directive, users will have the option to link their Pluxee prepaid wallet with third-party UPI apps, enabling seamless payments at retail stores and online platforms. This integration will emulate the convenience of bank account-linked UPI transactions, offering users more flexibility in managing their prepaid balances.

The broader implications of this decision are far-reaching, particularly in underserved areas and rural communities. Many PPI issuers in these regions do not currently offer UPI payment services to their customers. By allowing PPIs to connect with any third-party UPI app, the RBI's initiative aims to democratize access to digital payments. This move is expected to empower individuals in non-urban areas with the same capabilities as those with traditional bank accounts, thereby advancing financial inclusion efforts across the nation.

Overall, the RBI's proposal to link PPIs with third-party UPI apps marks a significant milestone in India's digital payment landscape. This progressive step aligns with the nation's broader vision of fostering inclusive and accessible financial services for all citizens.

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