Unified Payments Interface (UPI) Access for Prepaid Payment Instruments (PPIs) Through Third-Party Applications.
Currently, UPI payments involving bank accounts can be conducted using either the UPI application provided by the bank or third-party UPI applications. However, UPI payments involving PPIs, such as prepaid wallets, are restricted to the mobile application offered by the respective PPI issuer.
In a significant move announced on April 05, 2024, as part of the Statement on Development and Regulatory Policies, the Reserve Bank of India (RBI) has decided to enable UPI payments from/to full-KYC PPIs via third-party UPI applications. This change empowers PPI holders to make and receive UPI payments through third-party UPI apps, broadening accessibility and fostering interoperability. To implement this, relevant amendments have been made to the Master Directions on Prepaid Payment Instruments (MD-PPIs) issued on August 27, 2021.
The circular introducing these updates has been issued under Section 18, read with Section 10(2) of the Payment and Settlement Systems Act, 2007.
Revised Provisions for Achieving Interoperability Through UPI
Previous Instructions:
PPI holders could only be onboarded for UPI by their PPI issuer. The PPI issuer was allowed to link only its customer wallets to its UPI handle and was prohibited from onboarding customers of any bank or other PPI issuer.
UPI transactions involving PPIs required authentication via the customer’s existing wallet credentials, ensuring transactions were pre-approved before reaching the UPI system.
Revised Instructions:
PPI issuers must now enable full-KYC PPI holders to link their wallets to the issuer’s UPI handle for UPI payments. Transactions conducted on the PPI issuer’s application will continue to be authenticated using existing PPI credentials and remain pre-approved before reaching UPI.
Full-KYC PPI holders can now use third-party UPI applications to facilitate transactions. Third-party apps can link these PPIs to their respective UPI handles, enabling seamless transactions authenticated through UPI credentials.
This development represents a significant step toward interoperability in the digital payments ecosystem. By allowing PPI holders to transact via third-party UPI apps, the RBI aims to enhance user convenience and expand the scope of UPI payments. The focus on full-KYC PPIs ensures compliance with regulatory standards and mitigates security risks.
