Prepaid Wallet License in India
With the increasing popularity of cashless transactions, the concept of digital wallets has become a household term in India. In fact, the ease of using digital wallets has encouraged more and more people to adopt them as their primary mode of transaction. This has led to a significant rise in the demand for prepaid wallets, which are fast becoming the preferred choice for many consumers. In such a scenario, obtaining a prepaid wallet license has become essential for any company looking to enter the digital payments market in India. In this blog post, we take a closer look at what a prepaid wallet license is, and why it is crucial for businesses operating in the digital payments sector.
1. Introduction to Prepaid Wallet License in India
Indian customers have recently inclined towards digital payment modes, considering the rapid advancement and adoption of technology. In the wake of demonetization, the Reserve Bank of India (RBI) has been stressing the need to use cashless transfer methods. To promote this, RBI introduced the concept of Prepaid Wallet License or Prepaid Payment Instruments (PPI) in India, which enables financial transactions in digital format through prepaid wallets. The main role of a PPI License is to permit its users to purchase goods or services using the digital platform. It is a prepaid payment instrument that facilitates the purchase of goods, services, and fund transfers. RBI issues guidelines and rules for these licenses, and entities obtaining them must comply with these rules. These instruments can be used to access pre-paid amounts collectively known as Prepaid Payment Instruments. A Prepaid Wallet License is issued under the Payment and Settlement System Regulations 2008.
The minimum requirements for obtaining a Payment Wallet License include banks and Non-Banking Financial Companies (NBFCs) to have a NOC from the Department of Payment Settlement and Systems of RBI. The Non-banking entities must register under the Companies Act 2013 at the time of obtaining authorization from RBI under PSS regulations and have a minimum net worth of Rs. 5 crores according to the latest audited balance sheet during submission of the application. Also, the entity must achieve a minimum positive net worth of Rs. 15 crores with the end of the third Financial Year, which must be maintained throughout. A detailed project report and business plan, including banking accessibility points in rural or semi-urban areas, customer grievance redressal mechanism, and joint venture partnerships, must be submitted to RBI to acquire the license.
Prepaid Wallet is intangible, ensuring thefts or losses cannot occur. Its use for small-denomination payments is a notable advantage. The introduction of the Prepaid Wallet License in the Indian economy is a beneficial initiative towards a cashless society. Its benefits include faster and more secure transactions, tracking ease, and economical business practices. Additionally, Prepaid wallets enable financial inclusion, providing a banking solution to underserved and unbanked areas. Thus, Prepaid Wallet License has become an instrumental tool for driving India’s digital economy and encouraging financial transactions.Â
2. Purpose and Function of Prepaid Wallet License
A Prepaid Wallet License or Prepaid Payment Instruments (PPI) is a financial instrument that facilitates the transfer of money in digital form. It is issued by the Reserve Bank of India, with the aim of promoting cashless transfers of money, especially since demonetisation. The License enables users to buy goods and services, and conduct transactions on digital platforms with the value stored on such instruments. This stored value represents the value paid for in cash through debit to a bank account or credit card. Any instrument that can be used to access a prepaid amount is collectively called Prepaid Payment Instruments. The RBI issues guidelines and rules from time to time for the use of the Prepaid Wallet License, and entities obtaining the license must adhere to these rules.
The primary purpose of a Prepaid Wallet License is to encourage the use of digital transactions and reduce reliance on cash. Its functions include enabling the purchase of goods and services such as fund transfer against the value stored on such instruments. The process of obtaining a Prepaid Wallet License involves minimum requirements such as obtaining Non-Objection Certificates from RBI, registering under Companies Act 2013, and having a minimum net worth of Rs. 5 crores. Entities must also furnish a detailed project report, business plan, and complete details of the IT infrastructure. With a minimum capital requirement and adherence to guidelines, the introduction of Prepaid Wallet License in the Indian economy creates significant opportunities and benefits for both users and entities.Â
3. Eligibility Criteria for Obtaining Prepaid Wallet License
To set up a prepaid payment instrument platform in India, an entity should obtain a Prepaid Wallet License from the Reserve Bank of India (RBI). The eligibility criteria for obtaining this license include securing a No Objection Certificate from the RBI, preparing a detailed project report and business plan, complying with IT infrastructure planning and compliance rules, and meeting minimum net worth requirements. Non-banking entities, for instance, must be registered under the Companies Act 2013 and must have a minimum net worth of INR 5 crores at the time of authorization by RBI. The entity should also achieve a minimum positive net worth of INR 15 crores by the end of the third financial year and maintain it at all times. Furthermore, the entity’s object clause in its MOA should allow undertaking the issuer’s activities of PPI, and it must provide a Net Worth Certificate every year evidencing compliance with the net-worth requirements as per the audited balance sheet. With the introduction of Prepaid Wallet License, India moves further towards a cashless economy.Â
4. Minimum Requirements for Payment Wallet License
To set up a prepaid payment instrument (PPI) platform in India, companies need to obtain a Prepaid Wallet License from the Reserve Bank of India (RBI). The increasing adoption of digital payments has led to a surge in demand for PPI instruments in the country. The RBI issues guidelines and rules for prepaid payment wallets and is responsible for their regulation. Companies seeking to obtain a PPI license can get assistance from service providers like Enterslice. The process entails eligibility screening, obtaining a no-objection certificate from the RBI, incorporation, IT infrastructure planning, and compliance. Proper documentation and a system audit report are required to get approval. PPI platforms can be closed, semi-closed, or open wallets that allow cash withdrawals at ATMs and purchase of goods and services online and offline.
PPI instruments serve as a payment instrument for purchasing goods and services against the stored value on the instrument. Various types of PPI instruments include magnetic stripe cards, smart cards, internet and mobile accounts, mobile wallets, and paper vouchers. Closed and semi-closed wallets have limitations on cash withdrawal and redemption, while open wallets permit transfer of money among holders and cash withdrawal from ATMs. Payment wallets can be used for internet and mobile banking and purchasing goods by swiping cards on the point of sale (PoS) machine. Visa, Master Card, and Rupay cards can also be used for purchasing goods online and offline.
The process of obtaining a prepaid wallet license involves formation of a company under the Companies Act, filing an application for RBI approval in Form A, and submitting necessary documents. The RBI conducts a basic screening process to establish prima facie eligibility. An in-principle approval is granted if the eligibility criteria and other conditions are satisfied, and a satisfactory system audit report submitted within six months of the approval. The company must commence business within six months of obtaining a Certificate of Authorization.
The Indian government’s active measures to secure minerals like lithium indicate an increasing focus on technology and innovation. In this context, PPI instruments offer technological solutions to facilitate faster and easier money transfers. Meerad is a company that uses technology to streamline legal services and provide advisory support to clients. Their team is highly efficient and is well-versed in fintech business models and digital marketing skills. With technology, transparency, and regulatory compliance, PPI platforms are poised to revolutionize digital payments in India.Â
5. Benefits of Prepaid Wallet in the Indian Economy
Prepaid wallets have emerged as an extremely popular payment solution in India, especially after the introduction of Prepaid Wallet License by the Reserve Bank of India. These digital wallets bring about many benefits to the Indian economy.
One significant advantage offered by prepaid wallets is their ability to increase the security of digital transactions. Wallet-based transactions are password-protected and have multi-layered encryption, ensuring that user data remains secure and private.
Another benefit of prepaid wallets is that they offer a seamless payment experience with no lengthy processing times. Unlike net banking, where it takes 24-48 hours for funds to be transferred, prepaid wallet transactions are instant. This eliminates the need for users to have to wait for prolonged periods to receive goods and services.
Prepaid wallets also offer a great deal of convenience to users. They can make on-time payments with automated payment facilities available through the wallet. Additionally, these wallets are theft-free and eliminate the need for carrying physical wallets. There are no service fees to be paid, and some wallets offer incentives and rewards for referrals.
Overall, the introduction of prepaid wallets has brought about many positive changes in the Indian economy, making digital transactions more accessible, convenient and secure. The prepaid wallet license has played a crucial role in enabling financial inclusion and a cashless economy.Â
6. Guidance for Choosing the Right Type of PPI
India has seen a significant growth in digital transactions with customers rapidly adopting prepaid payment instruments. However, any entity that wishes to set up a PPI platform/instrument requires a Prepaid Wallet License from the Reserve Bank of India (RBI). There are various types of Prepaid Wallet Licenses prevalent in India, including closed, semi-closed, and open wallets. It is crucial to choose the right type of PPI that suits the business needs. Choosing the wrong type of PPI can lead to operational issues and can also impact the business. This is where professional guidance and assistance become necessary. Companies like Enterslice provide complete guidance on incorporating the company and obtaining the Prepaid Wallet License. They also help in obtaining a No Objection Certificate from the RBI and provide IT infrastructure planning and compliance.Â
7. Assistance in Obtaining NOC from RBI
India has seen a tremendous boost in digital transactions, thanks to the growing adoption of prepaid payment instruments by customers. If you want to set up a prepaid payment platform or instrument, you must obtain a Prepaid Payments Instruments (PPI) or Prepaid Wallet License from the Reserve Bank of India (RBI).
To help you with the process, Meerad offers assistance in obtaining a No Objection Certificate (NOC) from RBI. The NOC is required to set up a PPI platform/instrument and demonstrates that your business complies with RBI’s stringent guidelines on prepaid wallets.
With Meerad’s guidance, you can choose the right type of PPI that fits your business needs and provides complete assistance in the incorporation process, including IT infrastructure planning and compliance. Their expert team assures absolute transparency in legal services, facilitating optimum use of technology and process automation in consulting.
Meerad is a trusted partner for many businesses. They are a company that provides excellent advisory services with a highly efficient team that is cost-effective and saves time. They ensure that you have constant guidance and support throughout the process. The company’s support in building fintech software is amazing.
Their recommendations are backed by years of experience in the field and keep clients’ best interests in mind. With customised and highly trained chartered accountant services and digital marketing skills, Meerad provides businesses with the best in class services and advisory support. Stay updated with all the latest legal updates by subscribing for free.Â
8. IT Infrastructure Planning and Compliance
The setup of IT infrastructure forms an essential component of obtaining a Prepaid Wallet License in India. Any entity seeking this license must furnish complete details related to the setup of IT infrastructure for the operability of PPI. The entity should also provide a detailed project report and business plan to RBI. This business plan should cover aspects such as the bank’s access point in semi-urban or rural areas, customer grievance redressal mechanisms, and the joint venture partnership with the Scheduled Commercial Bank. It is crucial for the business plan to be realistic and feasible to ensure compatibility with the RBI’s guidelines and rules governing the use of prepaid wallet licenses. Furthermore, it is necessary for entities to be compliant with the guidelines issued by the RBI from time to time. Hence, it is crucial for entities to invest in IT infrastructure planning and compliance to ensure a smooth and hassle-free operation of PPI.Â
9. Transparency in Legal Services through Technology
In India, the use of digital transactions has been growing rapidly, and prepaid payment instruments (PPIs) have become increasingly popular. Any entity wishing to establish a PPI platform or instrument must get a PPI or prepaid wallet license from the Reserve Bank of India (RBI). Meerad is a company that offers guidance on obtaining the proper PPI license, including choosing the right type of PPI and obtaining no objection certificates from RBI. They also help entities with IT infrastructure planning and compliance.
Transparency in legal services is an essential aspect of Meerad’s mission. They achieve this through their efficient use of technology and process automation in consulting, which allows them to be more efficient than traditional competitors. This efficiency enables them to pass cost advantages on to their clients. They offer assistance to entities in obtaining their PPI license and are building a high level of transparency in their legal services.
With its professional and trusted advisory services, Meerad has gained a strong reputation in the market. Whether it is about obtaining a license or building fintech software, they provide constant guidance and support throughout the process. They pride themselves on being more than just experts in law, but also in digital marketing and fintech business models.
Clients highly recommend Meerad, citing its excellent advisory role and customer-friendly services. They invest themselves in their clients’ work and ensure timely delivery of services. Ultimately, they are committed to helping entities operate within the bounds of the law and stay up-to-date with legal updates.Â
10. Customer-Friendly Services and Business Advisory Support.
India has seen a significant increase in the use of digital modes of payment, including prepaid payment instruments. To set up a prepaid payment instrument platform, an entity must obtain a Prepaid Wallet License from the RBI. Meerad is one such company that offers guidance on the eligibility, procedure, and documents required to obtain such a license. They also provide assistance in obtaining a no objection certificate from the RBI and offer IT infrastructure planning and compliance services.
Corpbiz also provides information on the process of obtaining a Prepaid Wallet License. They offer a list of minimum requirements that must be met to obtain the license, including obtaining a minimum net worth of Rs. 5 crores, submitting a detailed project report and business plan to RBI, and having audited financial statements. Non-banking entities must also register under the Companies Act 2013 and have a net worth of at least Rs. 15 crores after three years of operation.
The introduction of the Prepaid Wallet License in the Indian economy has several benefits. One such benefit is that prepaid wallets are intangible and cannot be lost or stolen. Small denomination payments are also possible with prepaid wallets. Companies like Meerad offer customer-friendly services and business advisory support that can help entities navigate the process of obtaining a Prepaid Wallet License and comply with RBI guidelines and regulations. With their expertise in legal and fintech matters, Meerad is a trusted partner for many startups and businesses in India.Â
11. Advantages of Prepaid Wallet License in India
Prepaid wallet license is gaining popularity in India due to its many advantages. One of the benefits is the convenience it offers in conducting cashless transactions. Users can transfer money digitally and make purchases with the amount stored in the prepaid wallet. This allows for small denomination payments and eliminates the need for carrying physical cash or cards. Moreover, prepaid wallets are intangible and password-protected, reducing the risk of theft and loss.
Another advantage is the multi-layered encryption that provides enhanced data security during transactions. Unlike internet banking that requires several data entries before transferring the money, wallet-based transactions are quick and hassle-free. In addition, prepaid wallets have no transaction services fees, and some wallets offer rewards and incentives for referrals.
Obtaining a prepaid wallet license requires adherence to the guidelines set by the Reserve Bank of India, including registering under the Companies Act 2013, with a minimum net worth of Rs. 5 crores at the time of authorization. Entities must submit a detailed project report and business plan to the RBI and achieve a minimum positive net worth of Rs. 15 crores by the third financial year. These measures ensure the credibility and stability of prepaid wallet license applications.
In summary, the prepaid wallet license has proven to be an innovative solution to cashless transactions and has numerous advantages, including convenience, enhanced security, and affordability. Its popularity is on the rise in India, as more people shift towards digital payment methods.Â
12. Disadvantages of Prepaid Wallet License in India
Prepaid Wallet License in India is a significant step towards promoting cashless transactions in the country. It enables users to carry out digital transactions by using digital platforms such as mobile phones, the internet, etc. However, like every other financial instrument, prepaid wallets also have their disadvantages. It can be risky for people who are not tech-savvy. They might face difficulties while operating these wallets and might end up doing an unintended transaction.
Moreover, one cannot use the amount stored in the wallet for every kind of transaction. These wallets are limited to specific platforms, and the balance in the wallet can only be used for purchasing on the same platform. Hence, the scope of usage remains restricted to a particular merchant or business. This limitation can be frustrating at times for the users who might want to use the money stored in their wallet for other purchases or services.
Another significant disadvantage of prepaid wallets is that some established vendors and merchants do not accept payment through prepaid wallets. This situation can be challenging, especially if you want to purchase high-value goods or services from these vendors. Plus, in case of any fraud or error in transactions, it may take some time to be resolved, which can be a cause of inconvenience, delays and anxiety for the users.Â
13. Frequently Asked Questions about Prepaid Wallet License in India
What is a Prepaid Wallet License in India and why is it necessary?
A prepaid wallet license is a permit issued by the Reserve Bank of India (RBI) that allows individuals or companies to start a prepaid payment instrument business in India. With the demonetization drive in India, the RBI has emphasized the need for cashless transactions, and prepaid wallets have emerged as a popular mode of payment. To start this business, it is mandatory to obtain the certificate of authorization as per the Payment and Settlement Systems Act 2007.
What are the eligibility requirements for obtaining a Prepaid Wallet License in India?
The eligibility requirements vary depending on whether it is a bank or non-banking financial institution applying for the license. Banks and NBFCs need a No Objection Certificate from the Department of Payment Settlement and Systems of RBI. Non-banking entities need to register under the Companies Act 2013, have a minimum net worth of Rs. 5 crores and maintain a positive net worth of Rs. 15 crores after three years. Complete details of setup of IT infrastructure and a detailed project report must be furnished, along with a business plan.
What are the benefits of using a Prepaid Wallet?
Prepaid wallets are intangible and cannot be lost or stolen. Payments of small denominations can be made easily, and transactions are executed instantly. There are no hidden or additional charges associated with prepaid wallet transactions, and they offer many incentives and rewards. Adding money to the wallet is an easy task, and auto-pay facilities make due payments automatic.
What are the different types of Prepaid Wallet Licenses in India?
There are three types of prepaid payment instruments or RBI PPI wallet licenses in India: closed wallets, semi-closed wallets, and open wallets. Closed wallets are issued by a company and can be used exclusively for buying its products or services. Semi-closed wallets can be used to purchase from a group of sellers or merchants, while semi-open wallets can be used to purchase goods at stores that accept digital payments. Open wallets can be used to purchase goods and services anywhere.
What is the minimum capital requirement to obtain a Prepaid Wallet License in India?
Non-banking entities need a minimum net worth of Rs. 5 crores according to the latest audited balance sheet at the time of obtaining authorization from RBI under PSS. The net worth should be maintained at Rs. 15 crores for the financial status of the third year. The entity must achieve the net worth of at least Rs. 15 crores on or before 31st March 2023 if the entity gets final authorization on 1st March 2021.Â