The Reserve Bank of India issued ‘Master Direction on Issuance and Operation of Prepaid Payment Instruments’ dated October 11, 2017, wherein existing Prepaid Payment Instruments (PPI) issuers are required to ensure compliance with the revised requirements on or before December 31, 2017. One such requirement is to discontinue the issuance of prepaid meal instruments in paper voucher after December 31, 2017
Earlier in the year, the draft Master Direction on PPIs was placed on the RBI website on March 20, 2017 for public feedback. After examining the comments and views received from all stakeholders, RBI issued the master direction under Section 18 read with Section 10(2) of the Payment and Settlement Systems Act, 2007 and it came into effect immediately on the date of issue.
Under direction 7.7 of the Master Direction, the RBI has mandated that the PPIs may be issued as cards, wallets, and any such form/instrument which can be used to access the PPI and to use the amount therein. However, PPIs in the form of paper vouchers shall no longer be issued from the date of this Master Direction except for Meal Paper Vouchers where separate timeline has been indicated.
In furtherance to this, direction 7.13 of the Master Direction talks about prepaid meal instruments and lays down that the banks and non-bank entities issuing PPIs in the form of prepaid meal instruments, shall ensure that these are issued only as semi-closed PPIs, are in electronic form and reloadable. Please note that Semi-Closed PPIs are those instruments that can be used for purchase of goods and services at a group of clearly identified merchant locations/ establishments which have a specific contract with the issuer to accept the PPIs as payment instruments.
Also note that direction 9.2 of the Master direction lays down that the issuance of Semi-closed PPIs by banks and non-bank PPI Issuers shall be limited upto INR 20,000/- by accepting minimum details of the customer and will be limited up to INR 1,00,000/- with full KYC compliance.
Also, cash withdrawal or funds transfer is not permitted from such instruments. Such PPIs are not required to be issued as a separate category of PPIs and no prepaid meal instruments in paper voucher form shall be issued after December 31, 2017.
Business to business service companies like Sodexo and Edenred are major players issuing PPIs and are to be majorly affected in the market as their meal vouchers currently are offered as perquisites and employee rewards at many companies. These companies will have to stop issuing meal vouchers in paper form, however, it seems that they would be able to digitalize their vouchers before the deadline.
PPI Issuers are required to enter into arrangements only with employers whose due diligence has been completed and should also obtain and maintain the details of employees as obtained from the employers, to whom such PPIs are being issued. This step from RBI could prove to be a very positive step in the direction of a cashless Indian economy. Further, this transitioning to digitize food vouchers would reap benefits in compliances under Income Tax Rules as well.
The master direction by the RBI has also revised the current framework and to make it easy and viable for inter-operable use of PPIs through which money stored in one cash wallet can now be transferred to the mobile wallet service provided by some other service provider. This in turn makes payment options more accessible and secure and thereby, improves the payment and settlement systems in the country. The RBI is acting in the capacity of a watchdog and acting swiftly in ensuring the nation’s economic laws are moving in a direction of cashless economy where the payments are mostly electronic as well as safe and secure in nature.