Pre–Paid Cards: A New Way of Digital Payment

The Debit and Credit Cards have become have become integral  part of our life  in the present day world.  Of late, some other cards viz. Prepaid cards and Deposit Cards are also occupying an important space in our lives.  These cards are coming up with different features to suit the requirements of individuals as well corporates. Prepaid instruments (PPIs) have emerged as one of the most convenient payment tools for the people due to their under noted features:

i)                    Wide Acceptance – Accepted across most merchant outlets and online portals

ii)                  Virtual Card – Buy and deliver online without getting a physical card

iii)                High Security – Secure usage with a unique PIN

iv)                Flexible Denomination -Load any amount between Rs. 500 and Rs. 50,000

Some popular pre- paid cards of  leading Indian Banks

Banks issue Prepaid instruments (PPIs)as per RBI guidelines. The PPIs are of following three categories:-

  • Closed System Payment Instruments:

These instruments facilitate  purchase of goods/services from issuer outlets and do not permit cash withdrawal  or redemption like Big Bazar payback cards, Amazon Gift Cards, Flipkart Gift Cards.  As such these instruments are not covered under payment systems.

  • Semi-closed System Payment Instruments:

These are the payment instruments which can be used for purchase of goods and services, including financial services at a group of clearly identified merchant locations/establishments and do not permit cash withdrawal or redemption by the holder.

  • Open System Payment Instruments:

These are the payment instruments which can be used for purchase of goods and services, including financial services like funds transfer at any card accepting  merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs/BCs. Put in other words, they are as good as Debit Cards except that top up is required whenever balance is exhausted. Example – eZ Prepaid  Card, Achiever Card, Foreign Travel Card from SBI.

The Banks / NBFCs /Individuals who are authorized by RBI can only issue PPIs.  NBFCs/Individuals are permitted to issue only closed and semi-closed PPIs.

The maximum value of any PPI where specific limits have not been prescribed by RBI should not exceed Rs.50000/-.

Types of Prepaid instruments (PPIs):

  1. Semi-closed prepaid instruments: Following semi-closed PPIs can be issued after carrying out Customer due diligence as under:
  2. upto Rs.10000/- by accepting minimum details of customer provided the amount outstanding at any point of time does not exceed Rs.10000/- and total value of reloads during any given month does not exceed Rs.10000/-. These can be issued only in electronic form Ex: State Bank Buddy, ICICI Pockets
  3. from Rs.10001/ to Rs.50000/- by accepting any ‘officially valid document’ as per PML rules. Such PPIs can be issued only in electronic form and should be non-loadable in nature.
  4. upto Rs.100000/- with full KYC and reloadable in nature. The balance in the PPI should not exceed Rs.1.00 lac at any point of time.

Banks can issue open pre-paid instrument after full KYC in addition to semi-closed PPIs listed above.

  • Co-branded pre-paid instruments:

All persons authorized/approved to issue pre-paid instruments are permitted to co-brand such instruments with the name / logo of financial institution / Govt. organization etc for whose customers/beneficiaries such co-branded instruments are issued.  The name of the issuer shall be visible prominently on the payment instrument.  NBFCs/other persons desirous of issuing such co-branded PPIs may seek one time approval from RBI.

Example – “State Bank Imprest Card”, co-branded with different Zones of Indian Railway for disbursement of  petty cash expenses to station masters.

  • Pre-paid Gift instruments:

Valid for 3 years, not reloadable, maximum value of Rs.50000/-, no cash withdrawals permitted and KYC of purchasers to be maintained by issuers. Example:  State Bank Gift Card.

  • Pre-paid instruments by Banks to Govt. Organisations:

Verification of identity of the beneficiary is the responsibility of Govt. organization, Loaded/reloaded by debit to account of Govt. organization, transfer of funds from PPIs to regular bank account of the beneficiary possible and maximum value of PPI not to exceed Rs.50000/-.

  • Pre-paid instruments by Banks to other Financial Institutions (FIs):

Banks have to satisfy themselves about KYC practices being followed by such institutions, Loaded/reloaded by debit to account of FI, transfer of funds from PPIs to regular bank account of the beneficiary possible and maximum value of PPI not to exceed Rs.50000/-.

  • Pre-paid instruments for credit of Forex Remittance:

Banks are permitted to issue prepaid instruments to principal agents approved under Money Transfer Service  Scheme (MTSS) of RBI or directly to the beneficiary under the scheme for loading of the funds from inward remittances.  Banks have to satisfy themselves about systems followed by agents for identifying the beneficiaries if PPIs are issued to principal agents.  The cards can be loaded upto maximum extent of Rs.50000/- out of proceeds of inward remittance under MTSS guidelines.  Ex: STATE BANK XPRESS MONEY CARD issued through UAE Exchange and Financial Services Ltd.

  • Pre-paid instruments by Banks to Corporates:

The Corporates can pay periodic payments like salaries, medical bills etc to its employees through these cards without necessity of Bank accounts for its employees.

  • Verification of identity of employee is the responsibility of the Corporate
  • Corporates listed in any stock exchanges in India can only be issued PPIs
  • The details of employees to whom cards are issued to be maintained by Corporates
  • Maximum value outstanding at any point of time not to exceed Rs.50000/-.

SBI eZ  Pay Card is example of such instrument.

  • Pre-paid instruments by Banks to dependents/family members of account holders:

The dependents/family members of fully KYC compliant bank account holders can be issued one PPI per beneficiary.  The transaction and monthly limits as applicable for cash pay-out arrangements under DMT (Domestic Money Transfer) guidelines  issued from time to time by RBI (currently Rs.10000/- per transaction with a monthly ceiling of Rs.25000/-) will be applicable for such PPIs. Example –  SBI Smart Pay out Card.

  • Pre-paid instruments by Banks to visiting foreign nationals/NRIs:

Banks are permitted to  issue Rupee denominated non-reloadable  to (a) PPIs to NRIs and foreign nationals visiting India & (b) PPIs co-branded with exchange houses/money transmitters (approved by RBI) to NRIs/foreign nationals visiting India and can be activated only after arrival to India . Can be loaded upto maximum extent of Rs.2.00 lacs from a KYC compliant account, strictly for use  in India for transactions permissible under extant foreign exchange regulations, one non-transferable card per individual can only issued, cash withdrawal restricted to Rs.50000/- per month and such PPIs are issued only in electronic form.

  • PPIs for Mass Transit Systems:

The semi-closed PPIs is issued by the mass transit system operator (PPI-MTS) as per Payment and Settlement Systems Act, 2007.  The PPI-MTS contains the Automated Fare Collection application related to transit service to qualify as PPI-MTS. Apart from mass transit system, such PPI-MTS can be used only at other merchants whose activities are allied to or carried on within the premises of the transit system. Such instruments is valid for 6 months and they can be reloaded with maximum value/balance of Rs.2000/- at any point of time, no cash-out or refund permissible and Domestic Funds Transfer guidelines are not applicable.


All PPIs issued in the country is valid for  six months from the date of activation/issuance to the holder.  The issuer has to caution the PPI holder at reasonable intervals, during 30 days period prior to expiry of validity period of PPI, before forfeiting outstanding balances if any in the PPI.  In case of non-reloadable PPIs, transfer of outstanding to a new similar PPI of the same issuer purchased by the holder may be permitted.

Customer protection:

All pre-paid instrument issuers shall disclose all important terms and conditions in clear and simple language (preferably in English, Hindi and local language), comprehensible to the holders.

Other cards:

Many banks are issuing cards to facilitate only credit into the customer’s account.  These cards can be used in the machines situated either in the branches or outside like Cash Deposit Machines to credit the amounts very quickly.  SME Insta Deposit Card for their SME customers and Xpress Collect Card provided by SBI for their customers are some examples for such card.

To facilitate easy money transfer to family members of migrant workers who are working in far off places from their homes, as instructed by RBI, certain Banks have launched cards like Green Remit Card of SBI. For such transactions only beneficiary and not the remitter needs to have the account.

Certain employers are also getting Combo Cards issued in coordination with Banks which can be used as ID cards for employees noting their movement with Biometric records and also Debit Cards.  This category is bound to become further variety bound based on innovations adopted by various user groups.

As such the options available with user are quite varied with availability of Credit Cards, Debit Cards, PPIs and cards for credit into the account besides combo cards issued serving multiple purposes.

Author : M.V.L.N.Suresh (Faculty), State Bank Institute of Information and Communication Management (SBIICM)


Popular from web