RBI Allows Digital Payments for Public Transport through Prepaid Instruments

In a recent move, the Reserve Bank of India (RBI) has made changes to the Master Direction on prepaid payment instruments (PPI), permitting both banks and non-bank issuers to offer these instruments for public transport usage. 

The RBI highlighted that ”This decision aims to enhance the convenience, speed, affordability, and safety of digital payment methods for commuters utilizing various public transport systems.” The new instructions are successful immediately.

The Master Directions on PPIs, initially issued in 2021, define these instruments as tools facilitating the purchase of goods and services, financial services, and remittance facilities based on the stored value. There are two types of PPIs that require RBI approval: ”Small PPIs and full-KYC PPIs.”

Small PPIs, issued by banks and non-banks, require minimal details of the holder and are exclusively meant for purchasing goods and services, prohibiting funds transfer or cash withdrawal. 

On the other hand, full-KYC PPIs are issued after completing the Know Your Customer (KYC) process, allowing users to make purchases, transfer funds, or withdraw cash.

The issuance of PPIs by banks and non-banks is subject to RBI approval, with the recent amendment expanding the scope to include public transport services. It is worth noting that in June of the previous year, the RBI had already permitted non-banking PPI issuers to issue e-RUPI vouchers, distributed as QR codes or SMS on the beneficiary’s phone. 

According to reports, RBI Governor Shaktikanta Das, at the time, expressed optimism that these measures would make ”e-RUPI digital vouchers more accessible and contribute to the broader adoption of digital payments across the country.”