In its statement on development and regulatory policies dated April 5, 2024, the Reserve Bank of India (RBI) had decided to enable UPI payments from / to full-KYC Prepaid Payment Instruments (PPIs) through third-party UPI applications.

 

In furtherance to the same, the RBI has now published a circular in relation to UPI payments from / to full-KYC PPIs through third-party Unified Payments Interface (UPI) applications (“RBI Circular”). Pursuant to the RBI Circular, the RBI has amended the Master Direction on PPIs to enable PPI holders to make / receive UPI payments through the mobile application of third-party UPI applications.

 

Prior to the RBI Circular, UPI payments from / to a bank account could be carried out using the UPI application of that bank or of any third-party application provider. However, UPI payments from / to PPIs could only be carried out using the mobile application provided by the PPI issuer. Further, PPI holders were to be on-boarded for UPI by their own PPI issuer only. PPI issuer was to only link its customer wallets to the handle issued to it. PPI issuer as Payment System Provider (PSP) was not permitted to on-board customers of any bank or any other PPI issuer. In this regard, authentication was to be completed by the PPI holder as per her / his existing wallet credentials. In other words, a transaction would be pre-approved before it reaches the UPI.

 

Now, pursuant to the RBI Circular, the regulator has amended the following aspects under the Master Direction on PPIs in relation to the requirements for achieving interoperability through UPI:

 

  • 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 on-board 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.

 

For more details, kindly refer to the RBI Circular available by clicking on this link.

Authors & Contributors

Partner(s):

Vaibhav Kakkar

Snigdhaneel Satpathy

Sahil Arora

 

 

Associate(s):

Keshav Pareek

Ishaan Gupta

Shivani Pattnaik