FAQ – Frequently Asked Questions about PPI License in India
1. What is a PPI license and why is it required?
A PPI license, also known as a Prepaid Payment Instrument license, is a permit issued by the Reserve Bank of India (RBI) that allows entities to offer prepaid payment services to customers. It is required to ensure that only authorized and regulated entities engage in providing payment services to the public, thereby safeguarding customer interests and maintaining the stability and integrity of the financial system.
2. Who can obtain a PPI license in India?
Entities that wish to operate as payment system providers, such as banks, non-banking financial companies (NBFCs), mobile network operators, and other eligible entities, can apply for a PPI license in India. The eligibility criteria and specific requirements for obtaining a license vary based on the type of entity.
3. What are the different types of PPI licenses available?
The RBI offers three types of PPI licenses in India:
a) Closed-loop PPI: These instruments are issued by an entity for the purchase of specific goods or services. They can only be redeemed at designated merchants or establishments affiliated with the issuer.
b) Semi-closed loop PPI: These instruments are issued by banks or non-banks and can be used at multiple merchants or establishments that have a contractual relationship with the issuer. They do not permit cash withdrawal, but may allow fund transfers.
c) Open-loop PPI: These instruments, commonly known as prepaid cards or e-wallets, are issued by banks or non-bank entities and can be used anywhere within India for purchase of goods and services, including cash withdrawals at ATMs.
4. What are the requirements for obtaining a PPI license?
To obtain a PPI license in India, entities need to fulfill various criteria as specified by the RBI, which may include minimum net worth, capital adequacy ratio, technology infrastructure, security measures, governance framework, compliance with anti-money laundering and legal/regulatory requirements, and ensuring customer protection and grievance redressal mechanisms.
5. How long does it take to obtain a PPI license?
The time taken to obtain a PPI license can vary depending on the completeness of the application, the complexity of the business model, compliance with regulatory requirements, and the efficiency of the evaluation process undertaken by the RBI. Typically, the process may take several months.
6. Is the PPI license valid indefinitely once obtained?
No, the PPI license is not valid indefinitely. The RBI may grant PPI licenses for a specified period, usually for a maximum of five years. Entities need to ensure compliance with ongoing RBI guidelines and submit periodic reports to maintain the validity of the license.
7. Are there any transaction limits or restrictions associated with PPI licenses?
Yes, the RBI imposes limits and restrictions on transactions conducted through PPIs to safeguard the interests of customers and prevent illicit activities. These limits may include maximum balance, maximum monthly transaction value, and restrictions on international transactions, among others.
8. What happens if an entity operates without a PPI license?
Operating as a PPI without a valid license is considered a violation of the regulations and may lead to penalties, legal actions, or withdrawal of the entity's authorization to operate. The RBI actively monitors the market and takes necessary action against unlicensed participants to maintain the stability and security of the payment ecosystem in India.