The Reserve Bank of India (RBI) has announced a significant policy change to enhance interoperability in the digital payments ecosystem. Under the new framework, holders of Prepaid Payment Instruments (PPIs) will now be able to access the Unified Payments Interface (UPI) through third-party applications. This move is expected to simplify digital transactions and provide greater flexibility for wallet users.
Currently, UPI payments from/to a bank account can be carried out using the UPI application of that bank or of any third-party application provider. However, UPI payments from/to a PPI can only be carried out using the mobile application provided by the PPI issuer.
As announced in the Statement on Development and Regulatory Policies dated April 05, 2024, it has been decided to enable UPI payments from / to full-KYC PPIs through third-party UPI applications. This will enable PPI holders to make / receive UPI payments through the mobile application of third-party UPI applications.
As per the revised guidelines, 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. UPI transactions from PPI on the issuer’s application shall be authenticated using the customer’s existing PPI credentials. Such a transaction will, thus, be pre-approved before it reaches the UPI system.
A PPI issuer, in its capacity as a PSP, shall not onboard customers of any bank or any other PPI issuer. A PPI issuer may also facilitate discovery of its full-KYC PPIs on third-party UPI mobile applications, who, in turn, shall enable such PPIs to be linked to their PSP handle/s. Such UPI transactions, from PPIs using third-party UPI applications, shall be authenticated using the UPI credentials.
This policy change is expected to increase convenience for PPI users, promote competition and innovation in the digital payments industry, and further strengthen the role of prepaid wallets in India’s growing digital economy.
