Mumbai, Dec 27: The Reserve Bank of India (RBI) today announced that holders of prepaid payment instruments (PPIs) can now make and receive UPI payments through third-party mobile applications. The central bank stated in a circular that it has decided to allow Unified Payments Interface (UPI) payments from and to full-KYC PPIs via third-party UPI apps.
According to the RBI, PPI issuers must enable holders of full-KYC PPIs to link their PPIs to a UPI handle, allowing them to make UPI payments. UPI transactions initiated through the issuer's app will be authenticated using the customer's existing PPI credentials. This ensures that transactions are pre-approved before they reach the UPI system.
Additionally, the RBI clarified that PPI issuers, in their role as payment system providers, cannot onboard customers from other banks or PPI issuers.
The RBI's move aims to provide greater flexibility to PPI holders, such as those using gift cards, metro rail cards, and digital wallets. At present, UPI payments can be made from or to a bank account using the UPI app of that bank or a third-party application. However, UPI transactions from or to a PPI can only be done through the mobile application provided by the PPI issuer.
The UPI system, developed by the National Payments Corporation of India, enables instant real-time payment for inter-bank transactions via mobile phones. PPIs, on the other hand, are instruments that allow users to purchase goods and services, access financial services, and make remittances using stored value.
