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Prepaid Payment Instrument (PPI)

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Recently, a committee set up to review the Customer Service Standards in RBI Regulated Entities has recommended that the central bank should examine the extension of Deposit Insurance and Credit Guarantee Corporation (DICGC) cover to PPI.

About Prepaid Payment Instruments:

  • These are instruments that facilitate the purchase of goods and services, conduct of financial services and enable remittance facilities, among others, against the money stored in them. PPIs can be issued as cards or wallets.
  • There are two types of PPIs – small PPIs and full-KYC (know your customer) PPIs.
  • Further, small PPIs are categorized as – PPIs up to Rs 10,000 (with cash loading facility) and PPIs up to Rs 10,000 (with no cash loading facility).
  • PPIs can be loaded/reloaded by cash, debit to a bank account, or credit and debit cards.
  • The cash loading of PPIs is limited to Rs 50,000 per month subject to the overall limit of the PPI.

Who can issue PPI instruments?

  • PPIs can be issued by banks and non-banks after obtaining approval from the RBI.
  • Some of the approved PPI issuing banks are; Airtel Payments Bank, Axis Bank, Bank of Baroda, Jio Payments Bank, Kotak Mahindra Bank etc.

Key Facts about Deposit Insurance and Credit Guarantee Corporation

  • It is a statutory body established under the Deposit Insurance and Credit Guarantee Corporation Act, of 1961.
  • It is a wholly-owned subsidiary of the Reserve Bank of India (RBI).
  • It provides deposit insurance that works as a protection cover for bank deposit holders when the bank fails to pay its depositors.
  • The agency insures all kinds of deposit accounts of a bank, such as savings, current, recurring, and fixed deposits up to a limit of Rs. 5 lakh per account holder per bank.
  • In case an individual’s deposit amount exceeds Rs.5 lakh in a single bank, only Rs.5 lakh, including the principal and interest, will be paid by DICGC if the bank becomes bankrupt.

What DICGC Does Not Cover?

  • Deposits of state or Central governments, foreign governments, Inter-bank deposits, and state land development banks depositing with the state cooperative bank.
  • Funds that are due on account of India and deposits received outside India and funds exempted by the corporation with the previous approval from RBI.