RBI Issues Draft Master Direction on Prepaid Payment Instruments (PPIs), 2026

The Reserve Bank of India (“RBI”) has, vide its press release dated April 22, 2026, published the draft Master Direction on Prepaid Payment Instruments (“PPIs”), 2026, inviting public comments (“Draft Directions”). The Draft Directions have been issued pursuant to a comprehensive review of the extant guidelines, with the objective of developing a conducive framework for long-term growth of PPIs with enhanced security of transactions. Once enacted, the Draft Directions will supersede the existing Master Directions on PPIs, 2021.

The key aspects under the Draft Directions include, inter alia, the following:

1. Definitions: The Draft Directions amend/introduce definitions for certain key aspects thereunder, including the following:

• • Prepaid Payment Instrument (PPI): Payment instrument in which money is loaded and which facilitates subsequent transactions utilizing this money. For the purpose of the Draft Directions, money is denominated in Indian Rupees (INR) and does not include digital currency, and issuance of a prepaid instrument by an entity, other than a marketplace, only for the purpose of facilitating purchase of goods or services from the entity itself, is not considered as a payment system, and does not require authorisation from RBI.
  • Marketplace: An e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyer(s) and seller(s).
  • Merchant: An entity, including a marketplace, that sells goods, provides services, or offers investment products.

2. Categories of PPIs: The different categories of PPIs and associated conditions/requirements prescribed include inter alia the following:

• • General Purpose PPI: General Purpose PPI consists of Full-KYC PPI and Small PPI.
    • Full-KYC PPI: A Full-KYC PPI would be issued after completing customer due diligence (CDD) process, in accordance with RBI Master Direction on Know-Your-Customer (KYC) norms. A Full-KYC PPI shall be issued subject to inter alia the following conditions: (i) An issuer can issue only one such PPI to a holder at any point in time. (ii) Such PPI should have a minimum validity of one year from the date of issuance. (iii) The amount outstanding in such PPI shall not exceed INR 2,00,000/- at any point of time.
    • Small PPI: In case CDD of the customer could not be carried out in accordance with Master Directions on KYC, a Small PPI may be issued after obtaining minimum details of the customer. A Small PPI can be issued subject to inter alia the following conditions: (i) A Small PPI shall have a maximum validity of two years from the date of issuance; (ii) A Small PPI can be converted to a Full-KYC PPI, in accordance with Master Direction on KYC norms, during its validity period; and (iii) Small PPI should be used only for purchase of goods or services. Cash withdrawal or Person to Person (P2P) funds transfers from such PPI is not permitted. 

• Special Purpose PPI:
  • • Gift PPI: Non-reloadable PPI typically utilized for gifting purposes for purchase of goods or services at merchants. The maximum value of a Gift PPI shall not exceed ₹10,000/- and such PPI shall not be purchased by cash. The Draft Directions prescribe certain other conditions in relation to Gift PPI.
    • Transit PPI: PPI used only for payments across various modes of public transport such as metro, buses, rail, waterways, tolls and parking. Such PPI can be issued without KYC verification of the holders. The Draft Directions prescribe certain other conditions in relation to Transit PPI.
    • PPI for Foreign Nationals or Non-Resident Indians (NRIs): PPI denominated in INR and issued to foreign nationals/NRIs visiting India. The Draft Directions prescribe certain conditions relating to issuance of this category of PPIs.
    • Any other specific purpose PPI issued with prior approval of RBI.

3. Authorisation for PPI Business: 

• • Issuance of PPIs by banks: A bank permitted by RBI to issue debit cards can issue PPIs, with prior intimation to the Department of Payment and Settlement Systems (DPSS), Central Office, RBI, Mumbai.

• • Issuance of PPIs by non-banks: The key aspects include inter alia the following:
    • A non-bank entity shall seek authorisation by submitting an application, in Form A, through RBI’s online PRAVAAH portal.
    • The entity must be a company incorporated in India and registered under the Companies Act. The Memorandum of Association of the entity must cover the proposed activity of PPI issuance.
    • A non-bank entity having Foreign Direct Investment (FDI) shall be guided by the Consolidated FDI policy of the Government of India and the relevant foreign exchange management regulations on this subject.
    • An entity regulated by any of the financial sector regulator(s) shall apply along with a ‘No Objection Certificate’ from such regulator(s), within 45 days of obtaining the no objection certificate.
    • Application of an entity, not meeting the minimum net-worth criteria, or which is incomplete or not in the prescribed form, shall be returned.

4. Issuance and loading of PPIs: The key aspects include, inter alia the following:

• • A PPI may be issued as a card, wallet, or in any such form/instrument which can be used to access the PPI and to use the amount therein. No PPI shall be issued in the form of a paper voucher.
  • A PPI may be loaded by debit to a bank account or another PPI, or by cash, unless specified otherwise. A Special Purpose PPI may be loaded by a credit card as well.
  • A bank PPI issuer may load PPI through Business Correspondents (BCs).
  • A PPI issuer shall not pay any interest on PPI balances.
  • Use of a PPI for cross-border transactions is not permitted.

5. Co-branding Arrangements: 

• • A PPI issuer may enter into an arrangement with other PPI issuers, scheduled commercial banks, companies incorporated in India under the Companies Act, or Government Departments/Ministries/Institutions for issuing co-branded PPIs.
  • The role of a co-branding partner shall be limited to marketing or distribution related activities.
  • The PPI issuer shall be liable for all acts of the co-branding partner.

6. Customer Protection and Dispute Management: The key aspects include, inter alia, the following:

• • A PPI issuer shall disclose all features of PPI, and all associated charges, validity period and terms and conditions in clear and simple language (preferably in English, Hindi and the local language) to the holder while issuing the PPI.
  • A PPI issuer shall put in place a formal, publicly disclosed customer grievance redressal framework, including designating a nodal officer to handle customer complaints or grievances, the escalation matrix and turn-around times for complaint resolution.
  • Agents of the PPI issuer shall not impose any charges on the customers.
  • A PPI holder shall have recourse to the Rserve Bank – Integrated Ombudsman Scheme, 2026, as amended from time to time, for grievance redressal.

7. Escrow Accounts of PPI Issuers: In this regard, the Draft Directions prescribe inter alia that a non-bank PPI issuer shall maintain the funds collected against issuance of PPIs in a separate escrow account (in INR) with a Scheduled Commercial Bank in India. Further, such an escrow account shall be utilised only for authorised PPI business and not for any other business. There shall be no co-mingling of funds originating from any other activity that a PPI issuer may be undertaking. 

Conclusion:

The Draft Directions seek to consolidate and modernise the regulatory framework for PPIs by introducing clearer classifications, authorisation requirements, issuance norms, co-branding conditions, customer protection measures and escrow safeguards. Once finalised, the framework is expected to strengthen transaction security, improve regulatory clarity for PPI issuers and support the orderly growth of digital payment instruments in India.