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PPI regulation

Mains-GS-3-Economic Development

1. RBI recently announced amends in the regulation of PPIs.

Specifics

1. RBI recently made few key decisions

a. A customer can send money from a wallet to a bank account.

b. A customer can send money from one company’s wallet to another.

2. So far it was voluntary for PPIs to be interoperable.

3. Also the limit of the outstanding balance in PPIs has also been doubled to ₹2 lakh.

4. Central bank has allowed PPIs to become members of RBI-operated centralised payment systems—RTGS and NEFT.

5. Customers will also be able to use mobile wallets at ATMs to withdraw cash and at point-of-sale terminals (card-swiping machines). Currently, only wallets issued by banks offered a cash withdrawal facility.

Prudence

1. The facilities, however, can be availed only by those who have done a “full KYC" with the issuer of PPI.

2. RBI considers PPI to be full KYC-compliant only after the issuing company

a. Verifies identity and address-proof documents, and

b. Conducts either in-person verification or video KYC.

Analysis

1. PPIs for most practical purposes are made on par with banks.

2. A student in the future may not need a bank account when he/she enters college.

3. Parents can transfer money to the mobile wallet, which can be used to withdraw cash at ATMs or to make payments at merchant stores.

4. With wallets joining RTGS and NEFT payment systems, the student will also be able to use the wallet to pay fees, house rent and other expenses that required making bank transfers so far.

5. It will also improve payment security because a person needn't in future use banking channels to pay at a store.

Conclusion

1. It also further expands the frontiers of the digitalisation of the economy to a whole new level.

Source : Livemint