What is Prepaid Wallet License in India?

What are PPIs?

PPIs are instruments that facilitate the purchase of goods and services, conduct financial services, enable remittance facilities, etc., against the value stored therein.

As per the provision of the Payment and Settlement Systems Act, 2007, those wishing to start a Payment Wallet in India must obtain the Certificate of Authorization from the Reserve Bank of India. This authorization is called the Payment Wallet License. 

Prepaid Payment Instruments (PPIs) are referred to as instruments that have a high monetary value. One can use them to purchase goods and services at a fixed amount. These instruments store a fixed value of the user's amount to pay. The amount can be cash, credit card, or debit.

How to start a wallet business?

To start a Prepaid payment instrument, known by its more popular term, the prepaid wallet, one must obtain a Prepaid Wallet license in India.

Following are the different types of Prepaid wallets currently prevalent in India:

• Credit Card
• Debit Card
• Paper Vouchers
• Smart Cards
• Mobile accounts
• Magnetic Strip Cards

What are the different types of Prepaid Wallet Licenses?

Following are the types of prepaid payment instruments or RBI PPI wallet license in India:

1. Closed Wallet: They are issued by a company to a customer to buy products or services exclusively.
2. Semi-Closed Wallet: The holder of a semi-closed wallet is only allowed to do business with a certain group of sellers.
3. Semi-Open Wallet: The holder of a semi-open wallet can purchase goods at stores that accept digital cards.
4. Open Wallet: The holder can use it to purchase goods and services anywhere
5. Cross-Border Transaction: The above-mentioned guidelines are now for individuals with permission to use PPI instruments dominated by foreign exchange. 

Benefits of a Prepaid Wallet License

The following are the reasons to adopt an RBI PPI license or a Prepaid Payment wallet for conducting digital transactions:

• Prepaid Wallets are intangible. They can never be stolen or lost.
• If one has to make payment in small denominations, say Rs. 2347 or Rs. 234.87, such payments can be made through online prepaid wallets.
• Payment wallets execute the transactions instantly, unlike internet banking transactions, where the amount can be transferred only after 24 hours or 12 hours of adding the beneficiary.
• There are no hidden or additional charges associated with prepaid wallet transactions.
• There is no need to pay an activation fee, monthly charges, or annual fees, as in the case of internet banking or the annual charge of debit cards.
• These prepaid wallets offer many incentives to use the platform and offer rewards for referring the wallet to someone.
• Crediting money in the payment wallet is an insanely easy task. It can be added through net banking or debit cards quickly.
• The payment wallet provides auto-pay facilities to execute the due payments automatically.

Eligibility requirements to get Prepaid Wallet License in India

Following are the eligibility requirement for prepaid wallet license:

1. For banks and Non-banking financial institutions:

• There is no minimum capital requirement for banks and NBFCs. However, RBIs approval is still required before use of PPIs.

2. For Non-NBFC

• The non- NBFCs or other entities should have the net worth of at least INR 5 Crore to apply for prepaid wallet license.

3. Entities authorized by FEMA:

• There are no minimum capital restrictions on FEMA authorized entities. However, they can only implement PPIs for a limited number of current accounts.

Documents required for Prepaid Wallet License in India

• ID proof of the applicant
• Address proof of the registered office
• Certificate of incorporation
• Memorandum of Association
• A document detailing information about the management
• Details pertaining to the statutory auditors
• Audited balance sheet
• Name of the bankers of the company
• Address of the bankers of the company.

Process to get Prepaid Wallet License in India

How to get a PPI license?

How to apply for a PPI license? The process to obtain a prepaid wallet license from the RBI is as follows:

• Incorporate your business as a company as per the Companies act 2013
• Furnish the application for prepaid wallet via FORM A.
• File the application along with the required documents
• The RBI will screen the application
• Upon accepting your application, the RBI will issue you an "In principle" – it's the approval
• After receiving the approval, you – the applicant- must submit a satisfactory audit report to the RBI.
• The RBI will then analyze the audit report, documents, and your initial application.

If the reports, application, and documents satisfy the RBI, you'll be granted Prepaid Wallet Approval. 

License Validity

All the registered PPIs issued in the country have a minimum validity period of 1 year from the last loading/reloading date.

• A PPI issuer can issue PPIs with longer validity.
• The certificate of Authorisation issued by the RBI is valid for 5 years.
• But the issued certificate is subject to review, even cancellation by the Authority.
• If the customer engaging with a PPI is issued a valid card, they can also apply for the card replacement.
• The outstanding balances in any payment instrument must be depleted at 10% per month's outstanding value.
• The balance must not terminate immediately at the instrument's expiration.
• The PPI license holders must be informed about the expiry of the validity of the payment instrument.

Safeguards against Money Laundering Provisions

The guidelines issued by the Department of Regulation (DoR) of the Reserve Bank of India must apply mutatis mutandis to all the entities issuing PPIs.

The PPI issuer must adhere to the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) and rules.

The PPI issuer must maintain a log of all the PPI transactions for at least ten years. All such transactions must be made available for scrutiny to RBI.

The PPI issuer must file Suspicious Transaction Reports (STRs) to Financial Intelligence Unit-India (FIU-IND).

Issuance of PPIs

All entities authorized to issue PPIs by RBI are permitted to issue reloadable or non-reloadable PPIs.

• PPI issuer must have a policy duly approved by its Board for issuing various types of PPIs and their related activities.
• PPI issuer must ensure that the company's name is prominently displayed along with the PPI brand name in all instances.
• PPI issuers must also keep RBI informed regarding the brand names employed or employed for its products.
• PPI issuer must not pay any interest on PPI balances. 

Loading and Reloading of PPIs

PPIs must be permitted to be loaded/reloaded by cash, debit by a Bank account, credit and debit cards, PPIs (as permitted from time to time), and other payment instruments issued by regulated entities in India and shall be in INR only.

• Cash loading to PPIs is limited to Rs.50,000/- per month, subject to the overall limit of the PPI.
• PPIs must be issued as cards, wallets, and any instrument that can be used to access the PPIs.
• No PPI must be issued as paper vouchers to a PPI license holder in India.
• Banks must be permitted to load/reload PPIs according to the guidelines issued by the RBI.

Authorized Agent:

Banks and non-banks must be permitted to load/reload PPIs through their authorized agents subject to the following conditions:-

• Having a Board Approved Policy laying down the framework for engaging agents.
• Carrying out proper due diligence of the persons appointed as authorized agents.
• Being responsible as the principal for all acts of omission or commission of their authorized agents, including safety and security aspects.
• Preserving records and confidentiality of customer information in their possession as well as in possession of their authorized agents.
• Monitoring regularly the activities of their authorized agents and reviewing the performance of various agents engaged by them at least once a year.

Ensuring adherence to applicable laws of the land, including KYC / AML / CFT norms.

• PPI issuers must ensure that there is no co-mingling of funds from any other activity they may be undertaking.

Our assistance in getting you the prepaid wallet license in India

We provide end to end assistance in getting prepaid wallet license.

• Application filing
• Document drafting
• Department follow up

Thus, if you want to start a business of starting your own digital payment wallet, reach out to registrationwala. 

Frequently Asked Questions - PPI License

Q.1)  What is a PPI license?

PPI license is a legal permit that the RBI issues to facilitate Prepaid Payment Wallet services like:

• Purchase of goods and services,
• Conduct financial services, or
• Enable remittance facilities,

in exchange for the credit stored within.

Q.2)  What is the validity of a PPI license?

 All the registered PPIs issued in the country have a minimum validity period of 1 year from the last loading/reloading date. A PPI issuer can issue PPIs with longer validity. The certificate of Authorisation issued by the RBI is valid for 5 years. 

Q.3) What documents are required to register an application for payment e-wallet license registration?

The following documents must be submitted along with the application for payment e-wallet license registration:

• ID proof of the applicant
• Address proof of the registered office
• Certificate of incorporation
• Memorandum of Association
• A document detailing information about the management
• Details pertaining to the statutory auditors
•  Audited balance sheet
• Name of the bankers of the company
• Address of the bankers of the company.

Q.4) What are the different types of Payment e-wallet instruments in India?

Following are the different types of Prepaid Wallet Licenses in India:

1. Closed wallets: They are issued by a company to a customer to buy products or services exclusively.
2. Semi-closed wallet: The holder of a semi-closed wallet is only allowed to do business with a certain group of sellers.
3. Semi-Open Wallet: The holder of a semi-open wallet can purchase goods at stores that accept digital cards.
4. Open Wallet: The holder can use it to purchase goods and services anywhere
5. Cross-border transaction: The above-mentioned guidelines are now for individuals with permission to use PPI instruments dominated by foreign exchange.  

Q.5) How to get an RBI payment wallet license in India?

The process to obtain a prepaid wallet license from the RBI is as follows:

• Incorporate your business as a company as per the Companies act 2013
• Furnish the application for prepaid wallet via FORM A.
• File the application along with the required documents
• The RBI will screen the application
• Upon accepting your application, the RBI will issue you an "In principle" – it's the approval
• After receiving the approval, you – the applicant- must submit a satisfactory audit report to the RBI.
• The RBI will then analyze the audit report, documents, and your initial application.
• If the reports, application, and documents satisfy the RBI, you'll be granted Prepaid Wallet Approval.

Q.6) What pre-conditions need to be observed before filing a Payment E-wallet license in India?

Following are the eligibility requirement for a prepaid wallet license:

• For banks and Non-banking financial institutions: There is no minimum capital requirement for banks and NBFCs. However, RBI's approval is still required before the use of PPIs.
• For Non-NBFC: The non- NBFCs or other entities should have a net worth of at least INR 5 Crore to apply for a prepaid wallet license.
• Entities authorized by FEMA: There are no minimum capital restrictions on FEMA-authorized entities. However, they can only implement PPIs for a limited number of current accounts.