What Are Prepaid Wallets Or Prepaid Payment Instruments?
What is a Prepaid Wallet License?
Since demonetisation, the RBI has emphasized on the use of cashless transfer of money for any monetary purpose. Prepaid wallets are such financial instruments which help in the transfer or carrying money in the digital form. RBI is responsible for granting licenses for Prepaid wallets. Many existing and new companies are constantly applying for Prepaid Wallet Licenses. A Prepaid Wallet license is a Prepaid payment instrument that facilitates the purchase of goods and services, including funds transfer, against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holders by
The pre-paid instruments can be issued as
Before putting these prepaid instruments for use an entity needs to obtain the Prepaid Wallet License from RBI. The RBI issues guidelines and outlines rules at regular periods for use of Prepaid Wallet License. All the entities who have obtained the license must adhere to these rules.
Classification of Prepaid Payment Instruments
Capital and Eligibility Requirements for Issuing Prepaid Wallet License
Condition to Issue Prepaid Payment Instrument
How Prepaid Wallet is different from Digital Wallet?
Brief Procedure for Incorporation of Prepaid Wallet Business
STEP-1: – Formation of Company following the Company act, 2013 by applying to Registrar of Company.
STEP-2: Filling of Application for authorization in Form A as prescribed under Regulation 3(2) of the Payment and Settlement System Regulations, 2008. With fee to Reserve Bank of India for grant of License.
STEP-3: The applications shall be initially screened by RBI to ensure prima facie eligibility of the applicants
STEP-4: Subject to meeting the eligibility criteria and other conditions, the Reserve Bank of India issues an ‘in-principle’ approval. The validity of in-principle approval issued by RBI shall be six months from the date of granting such in-principle approval.
STEP-5: The entity shall submit a satisfactory System Audit Report to RBI within these six months, failing which the in-principle approval shall lapse automatically. An entity can obtain a one-time extension of six months by making a request in writing in advance with valid reasons. The RBI reserves the right to decline such request for an extension.
STEP-6: After consideration of all the particulars furnished by entities granted final authorization shall commence business within six months from the grant of Certificate of Authorization failing which the authorization shall lapse automatically.
STEP-7: The Certificate of Authorisation shall be subject to review and shall be valid for five years unless otherwise specified.
Documents Required For Prepaid Wallet License
Advantages of a Prepaid Wallet
Period of Validity for Prepaid Wallet License
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- Closed System Payment Instruments: These are generally introduced by business establishments to facilitate payments to their business outlets or establishment only. Eg. Ola Wallet
- Semi-Closed System Payment Instruments: These are payment instruments issued by a person for facilitating the purchase of goods and services from him/it. These instruments do not permit cash withdrawal or redemption. Eg. PayTm Wallet.
- Open System Payment Instruments: These are payment instruments which can be used for the 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. Eg. BHIM UPI.
RBI issues the Prepaid Wallet License.
Open system wallets are only approved for Banks and Non-Banking Financial Companies (NBFCs).
Prepaid Wallets loading limit is maximum 50,000 per month and can be done using credit/debit cards or net banking.