UPI Rule Change: According to the circular issued by RBI, only full-KYC PPIs will be allowed to be linked for UPI payments. UPI transactions initiated from a PPI will first be verified through the customer’s existing PPI credentials.
RBI: To promote digital payments, the Reserve Bank of India (RBI) has taken a big decision. Now it will be possible to make payments using prepaid payment instruments (PPIs) through third party UPI apps. The central bank has claimed that this change will promote interoperability in the digital payments ecosystem.
What are Prepaid Payment Instruments (PPIs)?
Prepaid Payment Instruments is a system in which users can save funds in a card or digital wallet for upcoming transactions. It is usually used for subscriptions and remittances. This new rule of RBI connects PPIs to the UPI ecosystem. UPI is India’s strongest digital payment platform.
What is the new UPI rule?
Earlier, PPIs such as digital wallets, gift cards and metro cards could only be used through their respective apps. But now, PPI holders with full-KYC (Know Your Customer) can link their instruments to popular UPI apps such as Google Pay, PhonePe, Paytm and BHIM, just like bank accounts are linked.
According to the circular issued by RBI, only full-KYC PPIs will be allowed to be linked for UPI payments. UPI transactions initiated from the PPI will first be verified through the customer’s existing PPI credentials. This pre-authorization process ensures that the transaction is verified before it is set up in the UPI system.
Will make digital payments more convenient
RBI has also clarified that PPI issuers, in the role of payment system provider, cannot onboard customers of any other bank or PPI issuer. This step has been taken to prevent potential conflict of interest and maintain a clear rule. This change will not only make digital payments more convenient but will also give new heights to the Digital India mission by making UPI stronger.
