Prepaid wallet License

What is prepaid wallet License?

Prepaid Payment Instruments, also known as PPIs, are the payment instruments which facilitates the goods and services transactions conducted by the consumer, including financial services, remittance facilities etc., against the value stored on such instruments. The PPIs have emerged as a smart and convenient method of initiating cashless transaction in the recent times where the country has experienced a whole lot of cash crunch. It is an effective way of payment carried out it transparency, scalability and accountability.

Generally PPIs are also called as e-wallets

Closed Prepaid Payment Instruments or Closed wallets

These may be issued by any entity which may include individuals, sole-proprietorships, partnership firms etc. for the purchase of goods and services from that entity only.As these instruments cannot be used for payments and settlement for third party transactions, the issue and operation of such do not require approval by the Reserve Bank of India.

Semi-closed Prepaid Payment Instruments or Semi-closed wallets

PPIs under this category can be used for purchase of goods and services from a group of merchants united for this only purpose. Cash withdrawal and redemption is not allowed by the holder of such instruments. All entities including individuals, NBFCs are permitted to carry on the business of semi-closed wallets after getting license from Reserve Bank of India.

Open wallets

This is a type of wallet which can be used to purchase goods and services and also permit cash withdrawal at ATM's. These wallets can be used for purchase of goods including financial services such as funds transfer at merchant locations, also cash withdrawal at automated business correspondents. Thus these are wallets used to buy goods and services, including fund transfer at merchant locations, also permit cash withdrawals at ATM'S. All Visa and master cards fall into this category. Only banks are authorized to issue and operate open-wallets.

Other conditions relating to capital requirements

•  The Net worth shall consist of the following items:

       1. Paid-up Equity capital;
       2. Preference shares;
       3. Free Reserves;
       4. Share premium account; and
       5. Capital reserves representing surplus.

•  In case of newly incorporated companies, a certificate from their Chartered Accountant regarding the current net worth along with provisional balance sheet shall be submitted. Moreover, the documents in relation to capital infusion and other funds acquired to start the business shall also be submitted.
•  In case of Banks and NBFCs, the approval is given by the Supervisory Department of the RBI.
•  The existing PPI issuers who obtained the license from RBI under previous capital requirements shall be liable to increase their net-worth in accordance with the present criteria by September 30, 2020, failing which their license shall be cancelled.
•  Only an entity incorporated under Companies Act, 1956 or Companies Act, 2013 shall be authorized to apply for the license from RBI.
•  The object clause of the MOA of the applicant company shall specify the proposed activity of operating as a PPI issuer.

Authorization Process for Non-Bank entities

•  An application shall be made by every non-bank entity seeking approval for license in Form A as prescribed under Regulation 3(2) of the Payment and Settlement System Regulations, 2008.
•  First of all, RBI judges the prima-facie eligibility of the applicant in preliminary screening.
•  Further, the ‘fit and proper’ status of the applicant and the management is assessed after intake of feedback from regulators, government authorities etc.
•  In case the applicant entity does not meets the eligibility criteria, the application shall be returned with no refund of the fees.
•  Apart from the eligibility criteria, the application shall also be assessed on the grounds such as customer service and efficiency, technical and other related requirements.
•  On the fulfillment of every condition, the in-principal approval is granted by the Reserve Bank of India, whose validity is of six months. Within six months of the in-principal approval, the entity is required to submit a satisfactory System Audit Report, failing which the in-principle approval shall lapse automatically.
•  The entities which have been granted final approval shall commence their operations within six months of the approval failing which the authorization shall lapse automatically. A one-time extension of six months can be obtained by making a request in writing in advance to the RBI with valid reasons. The RBI reserves the right to accept or reject such application for extension.
•  The Certificate of Authorization shall be valid for five years from the date of its grant.
•  For renewal of license, the application to the RBI shall be submitted three months prior to the expiry of the license, failing which RBI reserves the right to accept or reject such application for renewal.

Documents Required

For Prepaid wallet license

•  Name of applicant.
•  Constitution of applicant.
•  Address proof of registered office.
•  Certificate of Incorporation.
•  Main business of company.
•  Management information.
•  Statutory auditor of Company.
•  Audited balance sheet.
•  Name and address of bankers of Company.
•  Any other documents as may be required.
•  Prepaid Wallet Company Registration
•  Advice on Wallet Type (Open, Closed & Semi-Closed)
•  Prepaid Wallets IT Planning
•  Assistance in filing application
•  IT Infra planning
•  Assistance in PCI DSS Compliance
•  Advisory on use of AI

Validity of PPIs License

All PPIs issued by the PPI issuers shall have a minimum validity of one year from the date of its issuance to the PPI holder. The PPI issuers shall intimate the users about the expiry of their PPIs in a timely manner by SMS / e-mail / post or by any other means in the language preferred by the holder indicated at the time of issuance of the PPI. Even if the PPI expires, a grace period of at least 60 days shall be given by the PPI issuer to the customer.

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