In a move to enhance trust and stability in digital payments, the Reserve Bank of India (RBI) has proposed a major overhaul of the regulatory framework for prepaid payment instruments (PPIs).
The draft Prepaid Payment Instruments Directions, 2026 will replace the 2021 master directions. It aims to introduce stricter governance, stronger customer protection, and expand the role of digital wallets across the ecosystem. The revised framework will apply to banks as well as non-bank issuers, including fintech firms and wallet operators.
A key change is the clearer classification of PPIs into general-purpose and special-purpose instruments. The RBI has also tightened limits and usage rules. Full-KYC wallets will continue to allow balances of up to ₹2 lakh with monthly transaction caps. Small PPIs, issued with minimal documentation, will be limited to ₹10,000 and can only be used for merchant payments.
The central bank has also formalised new use cases such as transit wallets, gift cards, and prepaid instruments for foreign visitors under the “UPI One World” framework. This signals a push to integrate prepaid systems more closely with public infrastructure and tourism.
For issuers, the norms introduce stricter entry and operational requirements. Non-bank players must have a minimum net worth of ₹5 crore, which must increase to ₹15 crore within 3 years. They must also meet “fit and proper” criteria for promoters and directors. While authorisation will be granted on a perpetual basis, it will remain subject to continuous compliance.
Customer protection is a major focus. Issuers must clearly disclose charges, maintain strong grievance redressal systems, and integrate with the RBI’s ombudsman mechanism. Refunds for failed transactions must be processed immediately, even if this temporarily exceeds wallet limits.
The RBI has also strengthened safeguards by requiring customer funds to be held in escrow accounts with scheduled commercial banks. Fund commingling is strictly prohibited. Only a defined “core portion” of balances will be allowed to earn interest based on a rolling calculation.
To boost interoperability, issuers must ensure full-KYC PPIs work seamlessly across card networks and the Unified Payments Interface (UPI).
The draft reflects RBI’s balanced approach to encourage innovation while tightening oversight in a rapidly growing sector. The last date for submitting comments is May 22.
“The RBI’s draft PPI guidelines are a timely step to strengthen trust and discipline in the digital payments ecosystem. As the market evolves, clearer guardrails around security, grievance redressal, and issuer norms are critical for sustainable growth,” said Dilip Modi, Founder and CEO, Spice Money.
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