MUMBAI: The RBI has extended payments system access to KYC-compliant prepaid instrument issuers and standalone credit card companies and brought them on a par with banks. This has been done to enable financial inclusion using prepaid instruments, which can now almost double-up as a bank account.
Withdrawal of cash from ATMs using non-bank prepaid instruments (PPIs) is now allowed. Further, the RBI has cleared PPI issuers, credit card companies and white label operators to participate in centralised payment systems like Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT). This will enable holders of prepaid instruments to send and receive money from other bank accounts.
The RBI also doubled the end-of-the-day limit for maximum balances that can be held by a payments bank to Rs 2 lakh from Rs 1 lakh. Explaining the rationale, RBI executive director T Rabi Sankar said that the basic idea of allowing cash withdrawal is to level the playing field between banks and non-banks and reduce the need to actually hold cash.
“The fact that a PPI holder can access cash whenever he wants to reduces the need to hold cash. We believe this will give a big push to digitisation in the system,” he said.
Paytm Payments Bank MD & CEO Satish Gupta said, “The decision to increase the limit on maximum end-of-day balance to Rs 2 lakh for payments banks account holders will enable us to cater to the growing needs of our customers. Similarly, doubling of the current limit on the outstanding balance in full KYC PPIs to Rs 2 lakh will incentivise migration to full KYC PPIs, which will further bring financial inclusion across the country. We support an open and interoperable digital payments ecosystem and are looking forward to the detailed guidelines on this subject.”
Another chief of a payments bank said that the limit could have been increased to Rs 5 lakh as this would have enabled onboarding of small businesses who do not have access to bank accounts offering digital services.
The RBI move to put prepaid instruments on a par with banks is seen by some as providing an alternative to basic bank accounts for financial inclusion. While banks have been compelled to open crores of basic savings accounts under the Jan-Dhan Yojana, it is not remunerative for them.
In the past, some banks had experimented with issuing prepaid as an alternative to salary accounts to contractors employing construction workers.