Wallet Interoperability via UPI is now mandatory: RBI

Banks and non-bank entities issue PPIs in the country after obtaining necessary approval / authorisation from Reserve Bank of India (RBI) under the Payment and Settlement Systems Act, 2007 (PSS Act).

Taking into account the developments in the field and the progress made by PPI issuers, the existing instructions, issued on the subject till date, have been incorporated and are consolidated in their Master Directions (MD-PPIs) on 27th August 2021 ( RBI/DPSS/2021-22/82 CO.DPSS.POLC.No.S-479/02.14.006/2021-22).

The MD-PPIs lays down the eligibility criteria and the conditions of use for Payment System Operators (PSOs) involved in the issuance and operation of PPIs in the country.

Purpose for issuance :

a)?To provide a framework for authorisation, regulation and supervision of entities issuing and operating PPIs in the country;

b)?To foster competition and encourage innovation in this segment in a prudent manner while taking into account safety and security of systems and transactions along with customer protection and convenience; and

c)?To provide for harmonisation and interoperability of PPIs.

Highlights of this MD are as under :

• PPIs which are in the form of prepaid cards (physical or virtual) have to be affiliated to authorised card networks;
• PPI for mass transit systems will remain exempted from interoperability;
• While Gift PPI issuers (both banks and non-banks) have the option to offer interoperability;
• New PPIs issued in the form of cards have to be EMV Chip and PIN compliant, as applicable to debit and credit cards;
• The interoperability shall be facilitated to all KYC-compliant PPIs and entire acceptance infrastructure;
• It shall be mandatory for PPI issuer to give the holders of full-KYC PPIs (KYC-compliant PPIs) interoperability through authorised card networks (for PPIs in the form of cards) and UPI (for PPIs in the form of wallets);
• No entity can set up and operate payment systems for PPIs without prior approval or authorisation of the RBI;
• The master directions classify PPIs in two categories, namely- small PPIs and full KYC PPIs which were earlier classified as closed systems, semi-closed systems and open system PPIs;
• Full-KYC PPIs will be issued by banks and non-banks after completing Know Your Customer (KYC) of the PPI holder;
• The RBI has also said that PPI issuer shall have a board-approved policy for PPI interoperability;
• Full-KYC PPIs can be used for the purchase of goods and services, funds transfer or cash withdrawal, to the amount of INR 2 lakh at any point of time;
• Small PPIs can be issued by banks and non-banks after obtaining minimum details of the PPI holder. They shall be used only for purchase of goods and services. Funds transfer or cash withdrawal from such PPIs shall not be permitted. Small PPIs can have cash upto INR 10,000 loaded per month, not exceeding INR 1.2 lakh in a year;
• Interoperability shall be mandatory on the acceptance side as well. QR codes in all modes shall be interoperable by March 31, 2022;
• The RBI has also said the PPI issuer will have to implement a formal, publicly disclosed customer grievance redressal framework, including designating a nodal officer to handle customer complaints or grievances, the escalation matrix and turn-around-times for complaint resolution.
• In the case of PPIs issued by banks and non-banks, customers should have recourse to the Banking Ombudsman Scheme and Ombudsman Scheme for Digital Transactions respectively for grievance redressal.

PPI Interoperability:

In April 2021, RBI had announced that PPIs such as digital wallets have to be made interoperable which has been a bone of contention for payments players for a long time.

After the RBI released its?MD-PPIs in October 2017, digital wallets were expected to become interoperable within six months. But the plans were put on hold. Now, it has been mandated for fully know-your-customer (KYC) compliant PPIs.

Interoperability will be mandatory on the payment acceptance side as well. The deadline for enabling these measures is 31st March 2022.

This essentially means that digital mobile wallet users across the likes of Paytm, PhonePe users can transfer money across wallets.