RBI proposes a new prepaid card for transactions of up to Rs 10,000

Mumbai, December 5 () The Reserve Bank on Thursday proposed introducing a prepaid payment instrument (PPI) that could only be used for goods and services transactions worth up to Rs 10,000.

PPIs have been playing an important role in promoting digital payments and the incorporation of the new PPI will further facilitate its use, according to a RBI statement issued after the announcement of the monetary review on Thursday.

To further facilitate its use (PPI), it is proposed to introduce a new type of PPI that can be used only for the purchase of goods and services up to a limit of Rs 10,000, the statement said.

The central bank said that the loading and recharging of such PPIs can only be done from a bank account and is used to make bill payments and commercial payments.

These PPIs can be issued based on essential minimum details obtained from the client.

The RBI said it will give instructions on this before December 31, 2019.

PPIs are instruments to facilitate the purchase of goods and services, including financial services, remittance facilities, among others, against the value stored in said instruments.

These can be charged and recharged in cash or debit to a bank account or with a credit card or other PPI up to a limit of Rs 50,000 per month. As now, banks and non-bank entities can issue and recharge such payment instruments.

There are currently three types of PPI allowed by RBI: closed system PPI, semi-closed system PPI and open system PPI.

The banking regulator also announced that it would allow the Banking Units of the International Financial Services Center (IBU) to open current accounts in foreign currency of its corporate borrowers to facilitate the operation.

With respect to the liquidity coverage index, it has also allowed IBUs to accept fixed deposits in foreign currency of less than one year from non-bank entities and, consequently, eliminate the current restriction on premature withdrawal of deposits.

However, the current ban on the acceptance of retail deposits, including people with high net worth (HNI) will continue. The necessary instructions will be issued shortly, the RBI said.

The Reserve Bank also presented the revised currency hedging facilities that allow users to perform over-the-counter (OTC) currency derivative transactions of up to USD 10 million, without the need to evidence the underlying exposure.

Banks must have the discretion, in exceptional circumstances, of transferring the net proceeds of the hedging transactions reserved in advance exposures. Strengthening of safeguards to ensure that complex derivatives are sold only to users who are able to manage risks. said the RBI. Final instructions in this regard will be issued after notification of changes in the Regulations of the Currency Management Law (FEMA), RBI said in the 'Declaration on development policies and regulations'. KPM KPM ANU ANU