To ease money transfers and make it tech-savvy the Reserve Bank of India (“RBI”) has taken many steps to make payments fast, hence the onset of payment wallet license or prepaid wallet license. The different forms of payment wallet license are:
These payment services are operated under financial regulation and performed via mobile or cards or the internet. The regularity and issuing authority for issuing the Payment wallet license or a prepaid payment license is RBI. RBI is also responsible for issuing guidelines and rules for prepaid payment wallets. Payment wallet instruments are instruments that facilitate the purchase of goods and services against the stored value on such instruments. The prepaid instruments can be issued as magnetic stripe cards, smart cards, internet accounts, mobile accounts, mobile wallets and paper vouchers.
The payment wallets in India are classified as follows as per RBI:
The closed system wallet is a wallet that is offered by the company to its customers which can be used only for purchasing on the online platform that the company operates on. Example: Myntra, Cleartrip, etc.
This wallet is used to buy goods and services, and it acts as a payment instrument that is redeemable by an identified merchant that contracts specifically with the issuer to accept the payment instrument. Example: Paytm, Mobikwik, Freecharge, etc.
This covers all the limitations of the Closed and semi-closed system. This can be used for the purchase of goods and services and also permit cash withdrawal at an ATM. Example: Visa Card, Master Card, Rupay Card, etc.
There are many benefits of prepaid wallets, and they have become the new age money transfer mechanism. These wallets can never be stolen or lost; it is a fast track method for transfer, and the maximum time for a transfer is 24 hours. They can be easily loaded and come with a lot of incentives on the increased spend on them. Also, there are no extra charges for the activation of such wallets.
These institutions must obtain approval/authorisation from the Reserve Bank of India before starting a prepaid wallet by obtaining the respective license. There are specified capital requirements mentioned for these financial institutions to obtain their prepaid wallet License.
Minimum positive net worth of Rs. 25 crores as per the last audited balance sheet and the same shall be maintained at all times.
Entities which may not have an audited statement of financial accounts shall submit a certificate from their Chartered Accountants regarding the current net worth along with a provisional balance sheet. They shall also submit documents in support of the capital infusion and the funds available to undertake this business.
Minimum capital requirement as applicable under Consolidated FDI policy guidelines of Government of India.
Company incorporated in India and registered under the Companies Act 1956 / Companies Act 2013 and the Memorandum of Association (MOA) of the applicant entity shall cover the proposed activity of operating as a PPI issuer.