Reserve Bank of India (RBI) made it clear that the maximum value of any prepaid payment instrument, where specific limits have not been prescribed, should not exceed Rs 50,000. The central bank has also laid down certain exceptions in KYC requirements available only in cases wherein semi-closed system payment instruments up to Rs 1,000 may be issued subject to reporting of annual turnover or suspicious transactions. The issuer should ensure that, under no circumstance, more than one card is issued to the same person.
“Prepaid payment instruments up to Rs 5,000 can be issued by accepting any ‘government issued identity cards’ as proof of identity. Such instruments shall not permit cash withdrawal,” said the RBI in its draft guidelines.
The RBI also said that semi-closed prepaid payment instruments which permit only payment of utility bills or essential services up to a limit of Rs 10,000 can be issued without any KYC being undertaken by the issuer. The entities issuing such instrument may ensure that these instruments are made acceptable only at institutions which maintain the identity of the customers.
The utility bills or essential services shall include only electricity bills, water bills, telephone or mobile phone bills, insurance premium, cooking gas payments, ISP for Internet or Broadband Connections, cable or DTH subscriptions and citizen services by government or government bodies. Entities issuing prepaid payment instruments to institutions or companies for further issuance by these institutions or companies to their employees or other beneficiaries may ensure that these institutions maintain the full details of the employees or beneficiaries to whom such payment instruments are issued. The value of individual payment instrument shall not exceed Rs 5,000. Such instruments shall not permit cash withdrawal.
Moreover, the RBI said entities issuing prepaid payment instruments shall maintain a log of all the transaction undertaken using these instruments. “These data should be available for scrutiny by the RBI or any other agency or agencies as may be advised by the RBI. These entities should also file Suspicious Transaction Report (STR) to Financial Intelligence Unit – India,” the RBI said.
The RBI made it clear that all entities issuing prepaid payment instruments were permitted to issue reloadable or non-reloadable prepaid payment instruments.
Reloading of closed system payment instruments would be permitted at the retail agents and issuers outlets against cash, debit cards or credit card.
Banks and NBFCs are permitted to issue and reload such payment instrument at their branches against payment by cash or debit to bank account or credit card. Banks are permitted to issue and reload of such payment instruments through their business correspondents appointed as per the RBI. All prepaid payment instrument issued in the country shall have a minimum validity period of six months from the date of activation or issuance to the holder.
The prepaid payment instruments issuers shall put in place adequate information and data security infrastructure, and systems for prevention and detection of frauds. It is advisable to build a centralised database to prevent multiple purchases of payment instruments at different locations, leading to circumvention of limits if any prescribed for such payment instruments, said the RBI.
Talking about the customer protection issue, the RBI said that all prepaid payment instruments issuers should disclose all important terms and conditions in clear and simple language.