Tighter RBI vigil on prepaid cards

Issuers of pre-paid cards and vouchers have now been placed under tighter scrutiny to check black money generation.

By Our Special Correspondent in Mumbai
  • Published 21.10.17
  •  

Mumbai: Issuers of pre-paid cards and vouchers have now been placed under tighter scrutiny to check black money generation.

The RBI has issued a directive to the PPI issuers to maintain a log of all the transactions undertaken for at least 10 years. The log shall be made available for scrutiny to the RBI or any other third party.

The PPI issuers shall also file Suspicious Transaction Reports to the Financial Intelligence Unit-India.

The vigilance rules of the RBI comes at a time the PPI players are grappling to meet the apex bank's KYC requirements. Analysts said maintaining a log of at least 10 years will increase their compliance burden significantly, at a time their use has been rising post demonetisation.

According to the RBI Annual Report for 2016-17, PPIs recorded around 2 billion transactions, valued at Rs 83,800 crore for the year.

If transactions occur at the level of 2016-17 for the next five years, the PPIs will have to keep a record of humungous 10 billion transactions.

PPIs reported 314.5 million transactions in 2014-15 and 748 million in 2015-16, and the 2 billion of last fiscal takes total transaction to 3 billion for three years.

Recent RBI data on electronic payment systems show eight PPIs reporting 700 million transactions for just goods and services this fiscal.

PPIs are payment instruments that facilitate the purchase of goods and services, including financial services and remittance, against the value stored in them.

PPIs come under three types - closed system PPIs, semi-closed system PPIs, and open system PPIs.

Closed system PPIs are issued by an entity for the purchase of goods and services from that entity only and do not permit cash withdrawal.

Semi-closed system PPIs are used for goods and services, including financial services and remittance facilities, in clearly identified merchant locations which have a specific contract with the issuer to accept the PPIs .

Open system PPIs are issued only by banks and used at any merchant outlet for goods and services, including financial services and remittance. Bank PPIs also facilitate cash withdrawal at ATMs or any other points of sale, including business correspondents.

A recent apex directive on KYC has put the industry on a spot. For example, the RBI has said semi-closed PPIs should ask for full KYC over the next 12 months.