The Reserve Bank of India (“RBI”) on April 22, 2026 issued the Draft Master Direction on Prepaid Payment Instruments, 2026 (“Draft PPI MD”), for comments / feedback through the ‘Connect 2 Regulate’ section on RBI’s website.

Once finalized and notified, the Draft PPI MD is intended to replace the existing Master Directions on Prepaid Payment Instruments dated August 27, 2021, as amended from time to time (“Current PPI MD”).

At the outset, it should be noted that the Draft PPI MD introduces new categories of prepaid payment instruments (“PPIs”), although similar types of PPIs already exist under the Current PPI MD. The new categories are:

• General Purpose PPIs: These include Full-KYC PPIs and Small PPIs. The two Small PPI subtypes (i.e., Small PPIs with cash loading and without cash loading facility) have been subsumed into a single category; and
• Special Purpose PPIs: These include Gift PPIs, Transit PPIs, PPIs for Foreign Nationals/NRIs visiting India, and any other specific purpose PPI issued with the prior approval of the RBI.

The Draft PPI MD consolidates and streamlines the Current PPI MD into a single, simplified framework for regulating PPIs in India. It removes detailed provisions relating to KYC, reporting of unauthorized transactions, and outsourcing, and instead cross-refers to the RBI’s existing directions and regulations on these subjects. This approach reduces duplication and aligns the PPI framework with the RBI’s broader regulatory architecture. Set out below are the key changes proposed under the Draft PPI MD and their likely impact on PPI issuers and the wider PPI ecosystem.

KEY CHANGES

1. Authorization for PPI Business by Banks: Under the Current PPI MD, banks are required to obtain approval from the RBI to issue PPIs, in addition to fulfilling the prescribed eligibility criteria. The Draft PPI MD does away with this authorization process. Banks permitted by the RBI to issue debit cards will now only be required to provide prior intimation to the RBI before issuing PPIs.
2. Definition of Marketplace: While the Current PPI MD does not expressly define ‘marketplace’, it prescribes conditions for PPI issuers that have arrangements with a marketplace or the PA/PG of a marketplace, rather than directly with the end merchant. One such condition requires obtaining an undertaking from the marketplace and/or its PA/PG that payments made by the issuer are used for onward payments to the respective merchants. This undertaking must also be submitted by the PPI issuer to the bank maintaining the escrow account. The Draft PPI MD introduces a formal definition of ‘marketplace’ and removes the requirement for such undertakings.
3. Closed System PPIs: The Draft PPI MD continues to keep closed system PPIs outside the purview of RBI regulation. However, a specific carve-out has been made for PPIs issued by marketplaces as such PPIs can be used for transactions involving purchase of goods or services from sellers on the marketplace, and consequently, will require authorization from the RBI.
4. Fit and Proper Test: The Current PPI MD authorizes the RBI to assess the ‘fit and proper’ status of an applicant at the time of filing an application for authorization. The Draft PPI MD expands this requirement to also mandate that the promoters and directors of the applicant entity satisfy the fit and proper criteria. It also provides an exhaustive list of conditions to be fulfilled for this purpose.
5. Cooling Period: The Current PPI MD provides for a cooling period of one year in the following situations:

• A PPI issuer whose CoA is revoked or not renewed for any reason;
• A PPI issuer whose CoA is voluntarily surrendered for any reason;
• An entity whose application for authorization has been rejected by the RBI; or
• New entities set up by promoters involved in any of the above categories.

The Draft PPI MD removes the cooling period requirement altogether. Consequently, entities falling within the above categories may no longer be required to wait for one year before applying for fresh authorization.

That said, it will be important to note whether, once the Draft PPI MD is notified, it will have a repealing effect on the RBI’s Notification on Authorisation of entities for operating a Payment System under the Payment and Settlement Systems Act, 2007 (PSS Act) – Introduction of Cooling Period dated December 4, 2020 (“Cooling Period Notification”). If the Cooling Period Notification continues to remain valid, the provisions on the cooling period will continue to apply, irrespective of their removal from the Draft PPI MD.

6. Permitted Modes of Loading and Reloading PPIs: The Current PPI MD permits loading and reloading of PPIs via cash, debit to bank account, credit and debit cards, PPIs, and any other instrument issued by regulated entities in India. However, under the Draft PPI MD, General Purpose PPIs can only be loaded with cash, debit to bank account, and PPIs, while Special Purpose PPIs can be loaded with cash, debit to bank account, PPIs, and credit cards. Accordingly, if the proposed changes are implemented, PPI issuers will need to ensure that the permitted payment instruments for loading General Purpose PPIs are limited to cash, debit to bank account, and PPIs, with no other payment instruments, including credit cards, being permitted.
7. Cross-border use of PPIs: The Draft PPI MD categorically prohibits the issuance of PPIs for cross-border transactions. This is in contrast to the Current PPI MD, which permits banks with an AD-I license to issue Full-KYC PPIs for limited outward transactions under permissible current account transactions under FEMA (viz. purchase of goods and services), and allows both banks and non-banks to issue PPIs for inward remittances under the Money Transfer Services Scheme.
8. Changes to Monthly Debit Limits for Full-KYC PPIs: The Draft PPI MD introduces a two-tier limit on monthly debits. The aggregate monthly debit is capped at INR 2,00,000, while P2P fund transfers from a PPI to a bank account or another PPI are capped at INR 25,000 per month. The Draft PPI MD has also removed the concept of ‘pre-registered beneficiary’.
9. Cash Loading Limit: Cash loading to Full-KYC PPIs is capped at INR 10,000 per month, compared to INR 50,000 per month prescribed under the Current PPI MD for all PPIs.
10. Limit on Issuance of Full-KYC PPIs: The Current PPI MD does not explicitly prescribe a limit on the number of Full-KYC PPIs that can be issued to a PPI holder. The Draft PPI MD explicitly prescribes that only one Full-KYC PPI may be issued to a PPI holder.
11. PPIs for Foreign Nationals / NRIs Visiting India: Currently, Full-KYC PPIs can be issued to foreign nationals and NRIs visiting India. The Draft PPI MD categorizes PPI wallets issued to foreign nationals/NRIs for making Person-to-Merchant (P2M) payments during their stay in India as a separate category under Special Purpose PPIs. It also introduces a monthly debit limit of INR 5,00,000 for such PPIs.
12. Gift PPIs: The Draft PPI MD removes the provision on revalidation of Gift PPIs and limits their validity to one year from the date of issuance. Additionally, it does not mandate obtaining the consent of the PPI holder for transferring funds back to the source account.
13. Validity of PPIs: The Draft PPI MD prescribes stricter provisions for inactive PPIs and their subsequent closure. A PPI (other than a Transit PPI) with no financial transaction for a consecutive period of one year shall be classified as inactive and should be closed after one year of such classification, unless reactivated by the PPI holder.
14. Transfer to P&L Account: The Draft PPI MD appears to limit the ability of issuers to appropriate dormant balances by requiring balances to be transferred back to source or to the holder’s verified bank account.
15. Interoperability: While the Draft PPI MD continues to mandate that PPI issuers facilitate interoperability with UPI/card networks, it does not mandate interoperability on the acceptance side. The extant requirements for achieving interoperability under the Current PPI MD have been deleted altogether. These aspects will now be governed by the terms and conditions prescribed by the concerned network providers.
16. Permitted Debits and Credits from Escrow: The Draft PPI MD does not prescribe a specific list of permitted debits and credits. Instead, it prescribes that the escrow account shall be utilized only for authorized PPI business and not for any other purpose.
17. Migration of Escrow Account: The Draft PPI MD does not contain any specific provision on the migration of an escrow account from one bank to another.

Based on publicly available information, industry participants have collated their concerns regarding the provisions and changes proposed under the Draft PPI MD for submission to the RBI. The industry has raised particular concerns that certain changes such as reduced cash loading limits, caps on monthly fund transfers, prohibition on cross-border use of PPIs, modifications to Small PPI norms, and restrictions on transferring outstanding balances to profit and loss accounts may curtail business opportunities in the PPI sector, which is already facing revenue generation challenges. It remains to be seen whether the RBI will take cognizance of these concerns while finalizing the Draft PPI MD.