A Ban on Prepaid Payment Instruments Has Been Amended by the Reserve Bank of India: Discuss
- Saptaparni Raha
- Dec 3, 2022
- 1 min read
Written by Saptaparni Raha, Lawyer
Introduction
The Reserve Bank of India has prohibited fintech entities, wallet providers, and nonbanking financial companies from facilitating and extending loans through prepaid payment instruments.
Directive
The PPI- MD will not permit loading PPIs from credit lines. This activity must be discontinued immediately.
Any entity that does not comply with the directive may attract penal action under the payment and settlement systems Act.
Legal Framework Before This Directive
Purchase of any goods and services, financial services, etc., was facilitated by the prepaid payment instruments. The Reserve Bank of India's master directions on PPIs governs their issues, loading, reloading, and other matters. According to paragraph 7.5, it permits loading and reloading by cash, debit to a bank account, credit and debit cards, and other payment instruments registered in India.
Conclusion
Extending the credit lines through PPI enables better safeguards to ensure that it is used in accordance with the purpose for which it was granted and facilitates the convenience of cashless transactions.
Reference
Manasi Chandrani Shah, RBI Bans Loading of prepaid payment instruments(PPI) From Credit Lines (Taxguru)
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