The Reserve Bank of India has been emphasising the benefits of interoperability among issuing and acquiring entities alike, banks or non-banks, to promote optimal use of payment instruments such as cards, wallets, etc. and given the constraint of scarce acceptance infrastructure such as PoS devices, ATMs, QR codes, bill-payment touchpoints, etc.
Today, it was announced that customers who are fully KYC compliant will be able to withdraw cash from non-bank entities. Cash withdrawal is currently limited to full-KYC compliant PPIs issued by banks. Prepaid payment instruments are also known as PPIs. PPIs include things like forex cards and digital wallets.
There are three types of PPI instruments, according to the RBI website: closed system PPIs, semi-closed system PPIs, and open system PPIs. Only cash withdrawals from Open System PPIs are permitted.
Cash withdrawal is currently limited to full-KYC PPIs issued by banks and is available through ATMs and point-of-sale terminals. Given the assurance that they can withdraw cash as needed, PPI holders are less likely to carry cash and, as a result, are more likely to conduct digital transactions. As a confidence-building measure, it is proposed to allow cash withdrawals for full-KYC PPIs issued by non-bank PPI issuers, subject to a limit.
The measure, when combined with the interoperability mandate, will accelerate the transition to full-KYC PPIs and complement the acceptance infrastructure in Tier III to VI centres. Separate instructions will be issued if they are required.
Insofar as the PPIs were full-KYC, the guidelines issued in October 2018 enabled interoperability, albeit on a voluntary basis. Despite the passage of two years, there has been no significant progress toward full-KYC PPIs and thus interoperability, the RBI said.
As a result, it is proposed that full-KYC PPIs and all acceptance infrastructure require interoperability. To encourage the migration of PPIs to full-KYC, it is proposed that the outstanding balance limit in such PPIs be increased from Rs 1 lakh to Rs 2 lakh. Separate instructions will be issued if they are required.