RBI makes interoperability necessary for all pockets, PPI issuers

The Reserve Bank of India (RBI) on Wednesday announced its decision to make interoperability mandatory for all full-KYC prepaid payment instruments (PPIs) and other payment infrastructure. The regulator simultaneously announced an increase in the permitted outstanding balance in PPIs to Rs 2 lakh from Rs 1 lakh and allowed cash withdrawals from full-KYC non-bank wallets. The regulations effectively bring wallets at par with bank accounts in terms of service offerings.

RBI governor Shaktikanta Das expressed displeasure with the lack of effort on the part of industry players to voluntarily move towards interoperability. The central bank had issued guidelines in October 2018 for adoption of interoperability on a voluntary basis for full-KYC PPIs. As the migration towards interoperability has not been significant, Das said, it will now be mandatory for full-KYC PPIs and for all payment acceptance infrastructure.

At present, cash withdrawal is allowed only for full-KYC PPIs issued by banks. The allowing of cash withdrawals from all PPIs, in conjunction with the mandate for interoperability, will boost migration to full-KYC PPIs and would also complement the acceptance infrastructure in Tier-III to -VI centres, the RBI said. In addition, the RBI-operated centralised payment systems (CPSs) – RTGS and NEFT — will be opened up to non-bank payment system operators like PPI issuers, card networks, white label ATM operators and trade receivables discounting system (TReDS) platforms. The measure is aimed at minimising settlement risk.

Responding to a query about data breaches at non-bank PPIs and the role of the RBI’s supervisory architecture thereof, executive director T Rabi Sankar said the regulator’s objective would always be to protect the customer and make transactions as safe as possible. “To that extent, like we have issued to banks recently, we are looking at issuing guidelines that could lay down the basic minimum norms for cybersecurity and other security issues. As far as instances of such issues are concerned, we are seized of those matters and we are taking all the steps required to reduce the possibility of such events,” he said.

Manoj Chopra, VP & head – products and innovation, InfrasoftTech, said interoperability might help wallets claw back the space they had lost to banks and other players with the rise of Unified Payments Interface (UPI) and the new KYC requirements. “Cashbacks offered also did not help much. Interoperability will provide that much needed push for wallets and PPI providers,” Chopra said, adding that the transition would be fraught with risks. Customers will have to be more careful about digital frauds and wallet providers will have to beef up their technology infrastructure to be able to manage these risks.

As wallets become enabled with most transaction features available on bank accounts, they will be able to effectively compete for micro-savings from the under-banked segments, said Ketan Doshi, MD, PayPoint India.