Prepaid Payment Instrument (PPI) License: Types, Documents and Procedure

Prepaid Payment Instrument (PPI) License: Types, Documents and Procedure. Prepaid Payment Instruments (PPIs) have become an important enabler in India's journey toward a cashless and digital economy. Backed by the Reserve Bank of India (RBI), these instruments facilitate seamless payments, fund transfers, and remittances by using the pre-loaded amount stored in the instrument. A PPI License is mandatory for entities intending to issue and operate PPIs, ensuring they function under regulatory oversight and consumer protection norms.
What are PPIs?
Prepaid Payment Instruments or PPIs are financial instruments that enable transactions using a stored value. The value in these instruments is paid in advance by the user and stored digitally or physically, depending on the form. PPIs are widely used to purchase goods and services, transfer money, pay bills, or remit funds. The RBI governs PPIs under the Payment and Settlement Systems Act, 2005.
PPIs come in forms such as smart cards, e-wallets, mobile wallets, magnetic chips, vouchers, and other similar instruments. The funds can be loaded using various methods including cash, debit card, credit card, or even other PPIs.
Types of Prepaid Payment Instruments
The RBI classifies PPIs into three types:
Closed System PPIs
Closed-system PPIs are issued by a specific entity and are only valid for transactions with that entity. These cannot be used for payments to third parties or for cash withdrawals. As these instruments are not considered part of a payment system by the RBI, their issuance does not require RBI approval.
Examples of closed PPIs include gift cards from specific brands, metro rail cards, and shopping vouchers. These instruments often serve the purpose of loyalty rewards or specific product/service purchases.
Semi-Closed System PPIs
Semi-closed PPIs can be used to conduct transactions at multiple but specified merchants or service providers who have agreements with the PPI issuer. These instruments cannot be used for cash withdrawal but allow fund transfer and product/service purchase within a network.
The RBI mandates that both banks and non-bank institutions must seek authorization before issuing semi-closed PPIs. Well-known examples include Paytm, PhonePe, MobiKwik, Razorpay, and Instamojo. These instruments are ideal for making digital payments across online and offline platforms.
Open System PPIs
Open-system PPIs are exclusively issued by RBI-approved banks. These instruments allow complete flexibility, including purchase of goods and services, remittances, and cash withdrawal. They are widely accepted both domestically and internationally.
Debit and credit cards are the best-known examples of open-system PPIs. They can be used for point-of-sale transactions, ATM withdrawals, and online purchases globally, offering convenience and accessibility.
What are the Types of Semi-Closed PPIs?
Semi-closed PPIs are a subset in the digital payment infrastructure. They are not universally accepted and have usability restrictions. There are three main types:
Minimum Detail PPIs (Small PPIs)
These are issued by banks or non-banks based on limited customer information like OTP-verified mobile number, self-declared name, and a unique identity number from officially valid documents.
Two categories exist under this:

PPIs up to Rs. 10,000 with cash loading: Must be upgraded to full-KYC PPIs within 24 months.

PPIs up to Rs. 10,000 with no cash loading: Loading allowed only via online or banking channels.

PPIs with Bank Account Loading Only
Under this category, funds can be loaded into the PPI solely through a linked bank account. Cash loading or other mechanisms are not allowed. The maximum permissible value is Rs. 10,000.
Full-KYC PPIs
These are PPIs where full KYC norms have been completed by the issuer. They can be used for purchasing goods/services, transferring funds, and withdrawing cash. The higher compliance ensures greater user access and transaction flexibility.
Who Can Issue PPIs?
Entities eligible to issue PPIs in India must obtain a PPI License from the RBI. Both banking and non-banking institutions can be authorized PPI issuers:

Banks: All banks that meet the RBI’s eligibility criteria can issue PPIs. Mobile-based PPIs, however, need special approval from the RBI.

Non-Banking Entities: Must be incorporated in India with a minimum paid-up capital of Rs. 5 crore and maintain a positive net worth of at least Rs. 1 crore at all times. They are allowed to issue only semi-closed and closed system PPIs and must maintain an escrow account with a scheduled commercial bank.

Customer Protection in PPIs
Customer protection is a top priority in the regulation of PPIs. RBI mandates all PPI issuers to clearly disclose all terms and conditions in simple language. Issuers must provide details about:

Charges and fees applicable on PPI usage.

Customer care information, including contact number, email, and website.

Validity of the instrument and terms related to expiry.

Depreciation in the value of the instrument, if any, post expiry.

Additionally, customer protection practices include:

Use of encryption and multi-factor authentication.

Compliance with PCI-DSS standards.

Firewalls and intrusion detection systems.

Regular audits to detect security vulnerabilities.

These measures help build user trust and ensure the integrity of digital transactions.
What is the PPI Limit?
The RBI has prescribed limits for different types of PPIs:

The maximum balance that can be held in a full-KYC PPI is Rs.1,00,000.

For minimum-detail PPIs, the balance is restricted to Rs.10,000 per month.

Cash loading is not permitted for certain categories of small PPIs.

The PPI limit for online or electronic load is subject to the overall cap for the PPI type.

These limits are implemented to control risk and promote safe usage of digital payment systems.
Updates and News on Prepaid Payment Instruments
PPIs in India continue to evolve with regulatory enhancements and market-driven innovations. Key updates include:

RBI has now permitted PPI issuers to issue instruments for digital payments in public transport systems, enhancing accessibility and efficiency.

Paytm Payments Bank has been restricted from accepting any deposits or credits into customer wallets, accounts, or FASTags post-March 15, 2024.

Innovations include launch of virtual prepaid cards, linking wallets with UPI, and 'Buy Now, Pay Later' options, further simplifying digital transactions.

Being aware of such updates is important for both users and businesses to adapt and remain compliant with RBI norms.
List of RBI Approved PPI Issuers
1. Bank PPI Issuers: As of February 15, 2024, over 50 banks are authorized by RBI to issue PPIs, including major names such as:

HDFC Bank

ICICI Bank

State Bank of India

Axis Bank

Airtel Payments Bank

Paytm Payments Bank (restrictions applicable)

Kotak Mahindra Bank

IndusInd Bank

Yes Bank

These banks offer various types of PPIs including debit cards, prepaid cards, and mobile wallets.
2. Non-Banking PPI Issuers: RBI has also granted licenses to numerous non-bank entities such as:

PhonePe Private Limited

PayU Payments Private Limited

Razorpay Technologies

Amazon Pay India Private Limited

MobiKwik Systems Limited

Ebix Payment Services

Ola Financial Services

Cashfree Payments India

Spice Money Limited

Google India Digital Services

Zoho Payment Technologies

These non-bank issuers primarily provide semi-closed PPIs, allowing digital transactions across a large merchant network.
The complete list includes more than 100 active non-bank entities, each with specific validity periods and activity scopes as regulated by RBI.
Eligibility Criteria for PPI License in India
To obtain a PPI License (Prepaid Payment Instrument License) in India, applicants must fulfill specific eligibility criteria set by the Reserve Bank of India (RBI). These criteria ensure that only trustworthy and financially sound entities are allowed to operate payment systems that handle public money. One of the primary requirements is that the applicant must be a registered entity under the applicable Indian laws.

Firstly, only scheduled banks and Non-Banking Financial Companies (NBFCs) that are authorized by the RBI to provide mobile banking services can introduce mobile-based PPIs. These include mobile wallets and mobile accounts, which allow customers to make digital payments easily.

Companies that are registered under the Companies Act, 2013, are also eligible to apply for a PPI License. However, it is essential that their Memorandum of Association (MOA) includes the activity of issuing PPIs as part of their object clause. Without this, the application may be considered incomplete.

Another critical eligibility requirement is financial strength. The company must have a minimum net worth of INR 15 crores. This ensures that the entity is capable of managing the operations and associated financial risks effectively while maintaining public trust.

Documents Required for Prepaid Wallet License
To initiate the process of acquiring a Prepaid Wallet License, the applicant must submit several key documents. These documents help the RBI assess the financial health, operational capabilities, and legal standing of the applicant company. Below are the documents required for applying for a PPI License.

The first set includes the basic identification and corporate details such as the applicant's name and the address proof of the registered office. These details must be accurate and verifiable, as any discrepancies may delay the approval process.

A No Objection Certificate (NOC) from the RBI must be submitted, especially if the applicant is a bank or an NBFC. This NOC signifies the RBI’s initial consent to the application process and forms a vital part of the documentation.

The Certification of Incorporation is also a mandatory document. It confirms the legal existence of the company under the Companies Act, 2013. Alongside this, a detailed account of the company's main operations must be provided, outlining the nature of the business and its relevance to the digital payment ecosystem.

The applicant must also furnish managerial details, including profiles of the board of directors and key management personnel. These details give RBI insights into the leadership structure and their ability to manage such a license responsibly.

Further, a detailed project report and a comprehensive business plan are essential. These documents must clearly outline how the applicant plans to launch and manage its PPI operations, including details on technological readiness and customer service strategy.

The sources of funding must be disclosed, indicating whether the company has raised funds through equity, debt, or internal accruals. This is important for evaluating the financial stability of the company.

The proposed capital amount that will be invested in the PPI operations must be declared. This reflects the company’s commitment and preparedness to sustain the operations.

An audited balance sheet for the last financial year must be submitted. This helps the RBI assess the company’s past financial performance and its capacity to handle customer funds securely.

Applicants are also required to submit the names and addresses of their bankers. This information helps in cross-verification of financial transactions and liquidity status.

Moreover, the details regarding the appointment of the statutory auditor must be shared. It is important for ensuring financial audits and maintaining compliance with statutory norms.

Information about profits anticipated from the Indian financial system should be clearly outlined. This gives RBI a view of the company’s expectations and market strategies for growth.

Any additional information as required by the RBI must be furnished promptly. The RBI may seek further clarification or documents during the screening process, and timely submission ensures smoother processing.

Process for Obtaining a PPI License in India
The procedure to obtain a PPI License in India is comprehensive and involves multiple steps to ensure regulatory compliance. The process is designed to verify the applicant’s capability to manage a payment system that deals with public money.

The first step is Application Submission. The applicant must file a formal application to the Reserve Bank of India under Regulation 3(2) of the Payment and Settlement Systems Regulations, 2008. Along with the application, all required documents and the applicable government fee must be submitted. The application should be complete and accurate to avoid rejection.

The next phase is Screening. Once the application is submitted, RBI begins a thorough screening process. During this step, the RBI checks the eligibility of the applicant based on the documentation and background. This includes assessment of factors like customer service strategies, technological readiness, and safety measures implemented for data and transaction security.

Upon successful screening, the RBI issues an In-Principle Approval. This preliminary approval is valid for six months from the date of issuance. It allows the applicant to prepare the final infrastructure and compliance framework needed to operate the PPI system.

During the in-principle approval period, the applicant must submit a System Audit Report (SAR). This report must be prepared by an independent auditor and should cover all technical, operational, and security aspects of the proposed PPI system. The SAR is a mandatory requirement and helps RBI evaluate the system’s preparedness.

If the applicant is unable to comply within the initial six-month period, they can submit a written request for a Single Extension. This extension is also for six months and must include valid reasons and supporting documentation explaining the delay.

After reviewing the SAR and other final compliance documents, the RBI proceeds with Issuing the Final License. Once approved, the applicant receives the PPI License and is authorized to begin offering prepaid payment instruments in India.

Transactions Across Borders
Prepaid Payment Instruments that are used for cross-border transactions are subject to special rules. According to RBI’s notification, only those entities permitted to issue PPIs in foreign currency under the Foreign Exchange Management Act (FEMA), 1999, are exempt from the standard PPI regulations.
Such entities are allowed to conduct transactions in foreign currency up to a limit of Rs. 5000. This limit ensures that foreign transactions are conducted within a regulated framework and that risks are mitigated. These PPIs may be used for specific purposes such as travel or foreign education payments, but they must comply with FEMA provisions strictly.
Validity Period of Prepaid Payment Wallet License
The PPI License granted by RBI is generally valid for a period of five years. This license validity is subject to ongoing compliance reviews and can be revoked by the RBI if the license holder fails to adhere to the prescribed norms.
In terms of the instruments issued under the license, the minimum validity of a PPI is one year from the date of the last reload. However, issuers have the discretion to provide instruments with a longer validity period depending on their business model and customer requirements.
When a PPI is issued in the form of a card, customers are given the option to apply for a replacement card upon its expiration. This ensures continuity of services and avoids inconvenience to the users.
If a customer fails to renew the card and lets it expire, the remaining balance is not immediately forfeited. Instead, the issuer is allowed to deduct 10% of the balance every month until the entire amount is exhausted. This deduction process is carried out in a transparent manner and customers are informed in advance.
Furthermore, customers are notified prior to the expiration of their PPIs. The issuer must send timely reminders to ensure customers have the chance to renew or utilize the remaining funds. Renewal requests must be submitted within three months from the expiration date to avoid unnecessary deductions or deactivatio
Conclusion
PPIs have emerged as an important component of India's digital payment ecosystem. They offer convenience, speed, and security, catering to the evolving financial behavior of consumers. With clear classifications such as closed, semi-closed, and open systems, and guidelines around issuance, limits, and usage, PPIs ensure structured and regulated digital financial access.
A PPI License is not just a regulatory requirement but a mark of trust and compliance for banks and companies wanting to participate in the prepaid digital economy. As technology advances, the scope and capabilities of PPIs are expected to grow, introducing newer features and improving accessibility for all sections of society.
For more details or a free consultation, visit Compliance Calendar LLP official website and connect with their expert advisors.
Email: info@ccoffice.in
Call/WhatsApp: +91 9988424211
FAQs
Q1. What is a PPI License and why is it required?
Ans. A PPI License is issued by the Reserve Bank of India (RBI) to entities that wish to issue or operate prepaid payment instruments like mobile wallets, smart cards, or online wallets. It is required to ensure that only regulated and financially sound companies handle digital transactions involving public funds, thus safeguarding customer interests and maintaining trust in the financial system.
Q2. Who is eligible to apply for a PPI License in India?
 Ans. Eligibility for a PPI License includes scheduled banks and NBFCs authorized by the RBI to conduct mobile banking services. Additionally, companies registered under the Companies Act, 2013, can also apply, provided their object clause includes PPI-related activities. The company must also have a minimum net worth of Rs.15 crores and be incorporated in India.
Q3. What are the mandatory documents required for a PPI License application?
 Ans. Applicants must submit various documents including company incorporation certificate, NOC from RBI (if applicable), audited balance sheets, managerial details, project report, business plan, funding sources, statutory auditor appointment details, and other operational information. Each document plays a crucial role in assessing the company’s readiness and compliance with RBI norms.
Q4. What is the process to obtain a PPI License in India?
 Ans. The process starts with submitting an application under Regulation 3(2) of the Payment and Settlement Systems Regulations, 2008, along with necessary documents and fees. RBI conducts screening, grants in-principle approval (valid for 6 months), and then requires a System Audit Report. After satisfactory review, the final PPI License is issued.
Q5. How long is the PPI License valid?
 Ans. The PPI License is typically valid for five years, subject to regulatory review. However, the RBI can revoke it earlier if the license holder fails to comply with operational or financial norms. Issued PPIs (like wallets or cards) must have a minimum validity of one year from the last reload, though issuers may offer longer durations.
Q6. Are cross-border transactions allowed under a PPI License?
 Ans. Cross-border transactions are allowed only if the entity is permitted under the Foreign Exchange Management Act (FEMA), 1999. Such transactions are restricted to a maximum of Rs.5000 in foreign currency. These rules ensure compliance with foreign exchange laws while allowing limited international use of PPIs.
Q7. Can the PPI balance be forfeited after expiry of the wallet or card?
 Ans. No, the balance is not immediately forfeited. If the customer does not renew the card or wallet, the issuer is allowed to deduct 10% of the outstanding value every month until the balance is exhausted. Customers receive prior notification of expiry and are given a 3-month window to renew or reclaim their funds.
Q8. What is a System Audit Report (SAR) and why is it required?
 Ans. A System Audit Report is a comprehensive audit conducted by an independent auditor to assess the technical, security, and operational preparedness of the applicant’s payment system. It is mandatory after receiving in-principle approval from the RBI. The SAR helps the RBI verify whether the applicant is ready to launch secure and efficient PPI services.

Prepaid Payment Instruments (PPIs) have become an important enabler in India's journey toward a cashless and digital economy. Backed by the Reserve Bank of India (RBI), these instruments facilitate seamless payments, fund transfers, and remittances by using the pre-loaded amount stored in the instrument. A PPI License is mandatory for entities intending to issue and operate PPIs, ensuring they function under regulatory oversight and consumer protection norms.

What are PPIs?

Prepaid Payment Instruments or PPIs are financial instruments that enable transactions using a stored value. The value in these instruments is paid in advance by the user and stored digitally or physically, depending on the form. PPIs are widely used to purchase goods and services, transfer money, pay bills, or remit funds. The RBI governs PPIs under the Payment and Settlement Systems Act, 2005.

PPIs come in forms such as smart cards, e-wallets, mobile wallets, magnetic chips, vouchers, and other similar instruments. The funds can be loaded using various methods including cash, debit card, credit card, or even other PPIs.

Types of Prepaid Payment Instruments

The RBI classifies PPIs into three types:

Closed System PPIs

Closed-system PPIs are issued by a specific entity and are only valid for transactions with that entity. These cannot be used for payments to third parties or for cash withdrawals. As these instruments are not considered part of a payment system by the RBI, their issuance does not require RBI approval.

Examples of closed PPIs include gift cards from specific brands, metro rail cards, and shopping vouchers. These instruments often serve the purpose of loyalty rewards or specific product/service purchases.

Semi-Closed System PPIs

Semi-closed PPIs can be used to conduct transactions at multiple but specified merchants or service providers who have agreements with the PPI issuer. These instruments cannot be used for cash withdrawal but allow fund transfer and product/service purchase within a network.

The RBI mandates that both banks and non-bank institutions must seek authorization before issuing semi-closed PPIs. Well-known examples include Paytm, PhonePe, MobiKwik, Razorpay, and Instamojo. These instruments are ideal for making digital payments across online and offline platforms.

Open System PPIs

Open-system PPIs are exclusively issued by RBI-approved banks. These instruments allow complete flexibility, including purchase of goods and services, remittances, and cash withdrawal. They are widely accepted both domestically and internationally.

Debit and credit cards are the best-known examples of open-system PPIs. They can be used for point-of-sale transactions, ATM withdrawals, and online purchases globally, offering convenience and accessibility.

What are the Types of Semi-Closed PPIs?

Semi-closed PPIs are a subset in the digital payment infrastructure. They are not universally accepted and have usability restrictions. There are three main types:

Minimum Detail PPIs (Small PPIs)

These are issued by banks or non-banks based on limited customer information like OTP-verified mobile number, self-declared name, and a unique identity number from officially valid documents.

Two categories exist under this:

PPIs up to Rs. 10,000 with cash loading: Must be upgraded to full-KYC PPIs within 24 months.
PPIs up to Rs. 10,000 with no cash loading: Loading allowed only via online or banking channels.

PPIs with Bank Account Loading Only

Under this category, funds can be loaded into the PPI solely through a linked bank account. Cash loading or other mechanisms are not allowed. The maximum permissible value is Rs. 10,000.

Full-KYC PPIs

These are PPIs where full KYC norms have been completed by the issuer. They can be used for purchasing goods/services, transferring funds, and withdrawing cash. The higher compliance ensures greater user access and transaction flexibility.

Who Can Issue PPIs?

Entities eligible to issue PPIs in India must obtain a PPI License from the RBI. Both banking and non-banking institutions can be authorized PPI issuers:

Banks: All banks that meet the RBI’s eligibility criteria can issue PPIs. Mobile-based PPIs, however, need special approval from the RBI.
Non-Banking Entities: Must be incorporated in India with a minimum paid-up capital of Rs. 5 crore and maintain a positive net worth of at least Rs. 1 crore at all times. They are allowed to issue only semi-closed and closed system PPIs and must maintain an escrow account with a scheduled commercial bank.

Customer Protection in PPIs

Customer protection is a top priority in the regulation of PPIs. RBI mandates all PPI issuers to clearly disclose all terms and conditions in simple language. Issuers must provide details about:

Charges and fees applicable on PPI usage.
Customer care information, including contact number, email, and website.
Validity of the instrument and terms related to expiry.
Depreciation in the value of the instrument, if any, post expiry.

Additionally, customer protection practices include:

Use of encryption and multi-factor authentication.
Compliance with PCI-DSS standards.
Firewalls and intrusion detection systems.
Regular audits to detect security vulnerabilities.

These measures help build user trust and ensure the integrity of digital transactions.

What is the PPI Limit?

The RBI has prescribed limits for different types of PPIs:

The maximum balance that can be held in a full-KYC PPI is Rs.1,00,000.
For minimum-detail PPIs, the balance is restricted to Rs.10,000 per month.
Cash loading is not permitted for certain categories of small PPIs.
The PPI limit for online or electronic load is subject to the overall cap for the PPI type.

These limits are implemented to control risk and promote safe usage of digital payment systems.

Updates and News on Prepaid Payment Instruments

PPIs in India continue to evolve with regulatory enhancements and market-driven innovations. Key updates include:

RBI has now permitted PPI issuers to issue instruments for digital payments in public transport systems, enhancing accessibility and efficiency.
Paytm Payments Bank has been restricted from accepting any deposits or credits into customer wallets, accounts, or FASTags post-March 15, 2024.
Innovations include launch of virtual prepaid cards, linking wallets with UPI, and 'Buy Now, Pay Later' options, further simplifying digital transactions.

Being aware of such updates is important for both users and businesses to adapt and remain compliant with RBI norms.

List of RBI Approved PPI Issuers

1. Bank PPI Issuers: As of February 15, 2024, over 50 banks are authorized by RBI to issue PPIs, including major names such as:

HDFC Bank
ICICI Bank
State Bank of India
Axis Bank
Airtel Payments Bank
Paytm Payments Bank (restrictions applicable)
Kotak Mahindra Bank
IndusInd Bank
Yes Bank

These banks offer various types of PPIs including debit cards, prepaid cards, and mobile wallets.

2. Non-Banking PPI Issuers: RBI has also granted licenses to numerous non-bank entities such as:

PhonePe Private Limited
PayU Payments Private Limited
Razorpay Technologies
Amazon Pay India Private Limited
MobiKwik Systems Limited
Ebix Payment Services
Ola Financial Services
Cashfree Payments India
Spice Money Limited
Google India Digital Services
Zoho Payment Technologies

These non-bank issuers primarily provide semi-closed PPIs, allowing digital transactions across a large merchant network.

The complete list includes more than 100 active non-bank entities, each with specific validity periods and activity scopes as regulated by RBI.

Eligibility Criteria for PPI License in India

To obtain a PPI License (Prepaid Payment Instrument License) in India, applicants must fulfill specific eligibility criteria set by the Reserve Bank of India (RBI). These criteria ensure that only trustworthy and financially sound entities are allowed to operate payment systems that handle public money. One of the primary requirements is that the applicant must be a registered entity under the applicable Indian laws.

Firstly, only scheduled banks and Non-Banking Financial Companies (NBFCs) that are authorized by the RBI to provide mobile banking services can introduce mobile-based PPIs. These include mobile wallets and mobile accounts, which allow customers to make digital payments easily.
Companies that are registered under the Companies Act, 2013, are also eligible to apply for a PPI License. However, it is essential that their Memorandum of Association (MOA) includes the activity of issuing PPIs as part of their object clause. Without this, the application may be considered incomplete.
Another critical eligibility requirement is financial strength. The company must have a minimum net worth of INR 15 crores. This ensures that the entity is capable of managing the operations and associated financial risks effectively while maintaining public trust.

Documents Required for Prepaid Wallet License

To initiate the process of acquiring a Prepaid Wallet License, the applicant must submit several key documents. These documents help the RBI assess the financial health, operational capabilities, and legal standing of the applicant company. Below are the documents required for applying for a PPI License.

The first set includes the basic identification and corporate details such as the applicant's name and the address proof of the registered office. These details must be accurate and verifiable, as any discrepancies may delay the approval process.
A No Objection Certificate (NOC) from the RBI must be submitted, especially if the applicant is a bank or an NBFC. This NOC signifies the RBI’s initial consent to the application process and forms a vital part of the documentation.
The Certification of Incorporation is also a mandatory document. It confirms the legal existence of the company under the Companies Act, 2013. Alongside this, a detailed account of the company's main operations must be provided, outlining the nature of the business and its relevance to the digital payment ecosystem.
The applicant must also furnish managerial details, including profiles of the board of directors and key management personnel. These details give RBI insights into the leadership structure and their ability to manage such a license responsibly.
Further, a detailed project report and a comprehensive business plan are essential. These documents must clearly outline how the applicant plans to launch and manage its PPI operations, including details on technological readiness and customer service strategy.
The sources of funding must be disclosed, indicating whether the company has raised funds through equity, debt, or internal accruals. This is important for evaluating the financial stability of the company.
The proposed capital amount that will be invested in the PPI operations must be declared. This reflects the company’s commitment and preparedness to sustain the operations.
An audited balance sheet for the last financial year must be submitted. This helps the RBI assess the company’s past financial performance and its capacity to handle customer funds securely.
Applicants are also required to submit the names and addresses of their bankers. This information helps in cross-verification of financial transactions and liquidity status.
Moreover, the details regarding the appointment of the statutory auditor must be shared. It is important for ensuring financial audits and maintaining compliance with statutory norms.
Information about profits anticipated from the Indian financial system should be clearly outlined. This gives RBI a view of the company’s expectations and market strategies for growth.
Any additional information as required by the RBI must be furnished promptly. The RBI may seek further clarification or documents during the screening process, and timely submission ensures smoother processing.

Process for Obtaining a PPI License in India

The procedure to obtain a PPI License in India is comprehensive and involves multiple steps to ensure regulatory compliance. The process is designed to verify the applicant’s capability to manage a payment system that deals with public money.

The first step is Application Submission. The applicant must file a formal application to the Reserve Bank of India under Regulation 3(2) of the Payment and Settlement Systems Regulations, 2008. Along with the application, all required documents and the applicable government fee must be submitted. The application should be complete and accurate to avoid rejection.
The next phase is Screening. Once the application is submitted, RBI begins a thorough screening process. During this step, the RBI checks the eligibility of the applicant based on the documentation and background. This includes assessment of factors like customer service strategies, technological readiness, and safety measures implemented for data and transaction security.
Upon successful screening, the RBI issues an In-Principle Approval. This preliminary approval is valid for six months from the date of issuance. It allows the applicant to prepare the final infrastructure and compliance framework needed to operate the PPI system.
During the in-principle approval period, the applicant must submit a System Audit Report (SAR). This report must be prepared by an independent auditor and should cover all technical, operational, and security aspects of the proposed PPI system. The SAR is a mandatory requirement and helps RBI evaluate the system’s preparedness.
If the applicant is unable to comply within the initial six-month period, they can submit a written request for a Single Extension. This extension is also for six months and must include valid reasons and supporting documentation explaining the delay.
After reviewing the SAR and other final compliance documents, the RBI proceeds with Issuing the Final License. Once approved, the applicant receives the PPI License and is authorized to begin offering prepaid payment instruments in India.

Transactions Across Borders

Prepaid Payment Instruments that are used for cross-border transactions are subject to special rules. According to RBI’s notification, only those entities permitted to issue PPIs in foreign currency under the Foreign Exchange Management Act (FEMA), 1999, are exempt from the standard PPI regulations.

Such entities are allowed to conduct transactions in foreign currency up to a limit of Rs. 5000. This limit ensures that foreign transactions are conducted within a regulated framework and that risks are mitigated. These PPIs may be used for specific purposes such as travel or foreign education payments, but they must comply with FEMA provisions strictly.

Validity Period of Prepaid Payment Wallet License

The PPI License granted by RBI is generally valid for a period of five years. This license validity is subject to ongoing compliance reviews and can be revoked by the RBI if the license holder fails to adhere to the prescribed norms.

In terms of the instruments issued under the license, the minimum validity of a PPI is one year from the date of the last reload. However, issuers have the discretion to provide instruments with a longer validity period depending on their business model and customer requirements.

When a PPI is issued in the form of a card, customers are given the option to apply for a replacement card upon its expiration. This ensures continuity of services and avoids inconvenience to the users.

If a customer fails to renew the card and lets it expire, the remaining balance is not immediately forfeited. Instead, the issuer is allowed to deduct 10% of the balance every month until the entire amount is exhausted. This deduction process is carried out in a transparent manner and customers are informed in advance.

Furthermore, customers are notified prior to the expiration of their PPIs. The issuer must send timely reminders to ensure customers have the chance to renew or utilize the remaining funds. Renewal requests must be submitted within three months from the expiration date to avoid unnecessary deductions or deactivatio

Conclusion

PPIs have emerged as an important component of India's digital payment ecosystem. They offer convenience, speed, and security, catering to the evolving financial behavior of consumers. With clear classifications such as closed, semi-closed, and open systems, and guidelines around issuance, limits, and usage, PPIs ensure structured and regulated digital financial access.

A PPI License is not just a regulatory requirement but a mark of trust and compliance for banks and companies wanting to participate in the prepaid digital economy. As technology advances, the scope and capabilities of PPIs are expected to grow, introducing newer features and improving accessibility for all sections of society.

For more details or a free consultation, visit Compliance Calendar LLP official website and connect with their expert advisors.

Email: info@ccoffice.in

Call/WhatsApp: +91 9988424211

FAQs

Q1. What is a PPI License and why is it required?

Ans. A PPI License is issued by the Reserve Bank of India (RBI) to entities that wish to issue or operate prepaid payment instruments like mobile wallets, smart cards, or online wallets. It is required to ensure that only regulated and financially sound companies handle digital transactions involving public funds, thus safeguarding customer interests and maintaining trust in the financial system.

Q2. Who is eligible to apply for a PPI License in India?

Ans. Eligibility for a PPI License includes scheduled banks and NBFCs authorized by the RBI to conduct mobile banking services. Additionally, companies registered under the Companies Act, 2013, can also apply, provided their object clause includes PPI-related activities. The company must also have a minimum net worth of Rs.15 crores and be incorporated in India.

Q3. What are the mandatory documents required for a PPI License application?

Ans. Applicants must submit various documents including company incorporation certificate, NOC from RBI (if applicable), audited balance sheets, managerial details, project report, business plan, funding sources, statutory auditor appointment details, and other operational information. Each document plays a crucial role in assessing the company’s readiness and compliance with RBI norms.

Q4. What is the process to obtain a PPI License in India?

Ans. The process starts with submitting an application under Regulation 3(2) of the Payment and Settlement Systems Regulations, 2008, along with necessary documents and fees. RBI conducts screening, grants in-principle approval (valid for 6 months), and then requires a System Audit Report. After satisfactory review, the final PPI License is issued.

Q5. How long is the PPI License valid?

Ans. The PPI License is typically valid for five years, subject to regulatory review. However, the RBI can revoke it earlier if the license holder fails to comply with operational or financial norms. Issued PPIs (like wallets or cards) must have a minimum validity of one year from the last reload, though issuers may offer longer durations.

Q6. Are cross-border transactions allowed under a PPI License?

Ans. Cross-border transactions are allowed only if the entity is permitted under the Foreign Exchange Management Act (FEMA), 1999. Such transactions are restricted to a maximum of Rs.5000 in foreign currency. These rules ensure compliance with foreign exchange laws while allowing limited international use of PPIs.

Q7. Can the PPI balance be forfeited after expiry of the wallet or card?

Ans. No, the balance is not immediately forfeited. If the customer does not renew the card or wallet, the issuer is allowed to deduct 10% of the outstanding value every month until the balance is exhausted. Customers receive prior notification of expiry and are given a 3-month window to renew or reclaim their funds.

Q8. What is a System Audit Report (SAR) and why is it required?

Ans. A System Audit Report is a comprehensive audit conducted by an independent auditor to assess the technical, security, and operational preparedness of the applicant’s payment system. It is mandatory after receiving in-principle approval from the RBI. The SAR helps the RBI verify whether the applicant is ready to launch secure and efficient PPI services.