RBI issues approach paper on prepaid payment instruments

Mumbai, Nov 7 (UNI) The Reserve Bank of India today issued an approach paper on framing guidelines to ensure orderly development and operations of prepaid instruments in the country, issued both by banks and non bank entities.

The Approach paper said under the Payment and Settlement systems, Act 2007, which came into effect from August 12, 2008, all non-bank entities currently issuing pre-paid payment instruments and those proposing to issue such instruments would have to approach RBI for authorisation. Hitherto, only banks proposing to issue pre-paid cards were approaching RBI for authorisation.

The approach paper covered various aspects of prepaid instruments. They included capital requirements for an entity to issue such cards, the nature of business that would be licensed, supervised and reviewed, deployment of money collected and safeguards against money laundering and fraud prevention and security standards.

Pre-paid payment instruments facilitate purchase of goods and services against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holder, by cash, by debit to a bank account or by credit card.

The pre-paid instruments can be of different types such as smart cards, magnetic stripe cards, internet accounts, internet wallets, internet purse, mobile accounts, mobile wallets, mobile purse and paper vouchers.

A few non-bank entities, have been issuing pre-paid lunch coupons for the last few years. These companies do not issue these cards to individuals. The cards are issued to companies, who in turn issue the cards, mostly, to their employees. While these, cards are meant for meal coupons, which can be used by the employees for payment for meals at the locations where they are accepted, they can be used for purchase of groceries also. In case of such cards these entities should ensure that the companies to whom these cards are issued maintain the full details of the persons who will be using the cards. This is important since these meal/lunch coupons can also be used for buying provisions at stores/shopping malls.

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