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CAIIB-RETAIL BANKING-RECOLLECTED QUESTIONS FROM DEC 2017


Pre-paid payment instruments (PPIs)

Pre-paid payment instruments (PPIs) are payment instruments to purchase of goods and services & funds transfer, against the value stored on such instruments. The value represents the value paid for by the holders by cash, by debit to a bank account, or by credit card. The PPI can be issued as smart cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts,mobile wallets, paper vouchers and any such instrument which can be used to access the pre-paid amount.

The PPIs that can be issued are classified under 3 categories.

1. Closed System Instruments: These are issued by a person to facilitate purchase from him and not for cash withdrawal or redemption. These are not classified as payment systems.

2. Semi-Closed System Instruments: These can be used for purchase, at a group of identified merchant establishments having a specific contract with the issuer to accept the instruments.

These do not permit cash withdrawal or redemption.

3. Open System Payment Instruments: These can be used for purchase, including financial services like funds transfer at any card accepting merchant locations (point of sale terminals) and also permit cash withdrawal at ATMs / BCs.

Eligibility to issue PPI:

Banks that comply with the eligibility criteria can issue all categories of PPIs. NBFCs and other persons can issue only closed and semi-closed system PPIs, including mobile phone based PPIs.

Capital Requirements

Banks and Non-Banking Financial Companies (incorporated in India) should comply with Capital Adequacy requirements of RBI.
Other persons shall have a minimum paid-up capital of Rs. 500 lakh and min positive net worth of Rs. 100 lakh at all the times.

Categories of Pre-paid Payment Instruments

1. The maximum value of any pre-paid payment instruments shall not exceed Rs 50,000, unless specific limit is prescribed.

2. The following semi closed PPIs can be issued on carrying out

Customer Due Diligence:

i. upto Rs.10,000/- by accepting minimum details of the customer provided outstanding amount or credit in a month does not exceed Rs. 10,000/- (only in electronic form)

ii. from Rs.10,001/- to Rs.50,000/- by accepting any ‘officially valid document’ as per PML Rules 2005 (only in electronic form and should be non-reloadable)

iii. upto Rs.1,00,000/- with full KYC and can be reloadable in nature.Open PPI after full KYC, can be issued by banks in addition to semi closed PPIs.

Conditions for issue of Prepaid Gift instrument :

a. The maximum validity shall be 3 years and maximum value shall not exceed Rs. 50,000/-.

b. These shall not be re loadable and cash withdrawal shall not be permitted.

c. Full KYC of the purchasers and beneficiary of such instruments shall be maintained.

Conditions for issue of PPI by banks to Govt. Agencies for onward issuance to beneficiaries of Govt. schemes:

a. Verification of the identity of the beneficiaries shall be by Government Organizations.

b. The maximum value of each such payment instrument shall not exceed Rs. 50,000/-.

Conditions for issue of PPI by banks to other Financial Institutions for credit of onetime/ periodic payments by these organizations to their customers:

a. These instruments shall be loaded / reloaded only by debit to a bank account.

b. The maximum value of such payment instrument shall not exceed Rs. 50,000/-.

Conditions for issue of PPI by banks for credit of cross border inward remittance.

a. Banks can issue PPI to principal agents approved under Money Transfer Service Scheme (MTSS) or directly to the beneficiary.

b. The card shall be loaded only with the remittance proceeds received under the MTSS guidelines.

c. Maximum value of such instrument shall not exceed Rs. 50,000.

d. Splitting of single credits among different modes of payment shall not be permitted. Any amount received in excess of Rs.50,000 under MTSS should be paid by credit to a bank account.

Conditions for issue of PPI by banks to Corporates for onward issuance to their employees:

a. Prepaid payment instruments can be issued only to corporate entities listed in any of the stock exchanges in India.

b. These prepaid payment instruments shall be loaded / reloaded only by debit to the bank account.

c. The maximum value outstanding on individual prepaid payment instruments at any point of time shall not exceed Rs. 50,000/-.

Conditions for issue of multiple PPIs by banks from fully-KYC compliant bank accounts for dependents / family members:

a. Only one card can be issued to one beneficiary.

b. The transaction and monthly limits as applicable for cash payout arrangements under DMT guidelines (currently Rs 10,000 per transaction with a monthly ceiling of Rs 25,000) will be applicable.

Conditions for Rupee denominated PPIs for visiting foreign nationals and NRIs :

a. The cards can be issued by overseas branches of banks in India upto a maximum amount of Rs.2 lakhs by loading from a KYC compliant bank account.

b. PPIs should be activated only after traveller arrives in India.

c. Monthly cash withdrawal will be restricted to Rs 50,000.

Conditions for PPI for Mass Transit Systems (PPI-MTS)

1. The PPI-MTS will contain the Automated Fare Collection application related to the transit service to qualify as PPI-MTS;

2. The minimum validity will be six months from the date of issue;

3. The PPI-MTS may be re loadable in nature and at no point of time the value / balance in PPI can exceed the limit of Rs. 2,000.

Validity

1. All PPIs issued shall have a minimum validity period of six months from the date of activation/issuance to the holder.

2. PPI issuers shall caution the PPI holder at reasonable intervals, during the 30 days’ period prior to expiry of validity period of PPI, before forfeiting outstanding balances in the PPI, if any.

Transactions Limits

1. There is no separate limit on purchase, using PPIs.

2. In the case of open system PPIs issued by banks in India, cash withdrawal at POS can be up to a limit of Rs.1000 per day subject to the same conditions as applicable to debit cards (for cash withdrawal at POS).

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Prepaid payment instruments are methods that facilitate purchase of goods and services against the value stored on such instruments. The value stored on such instruments represents the value paid for by the holder, by cash, by debit to a bank account, or by credit card.

The prepaid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, online wallets, mobile accounts, mobile wallets, paper vouchers and any such instruments used to access the prepaid amount.

Closed System Payment Instruments
These are payment instruments issued by a person for facilitating the purchase of goods and services from him/her/it. Closed wallets are wallets which are issued by a company to a consumer for buying goods and services exclusively from that company. Examples: Amazon Wallet, Cleartrip Wallet

Semi-Closed System Payment Instruments
These payment instruments are redeemable at a group of clearly identified merchants that contract specifically with the issuer to accept the payment instrument. These instruments do not permit cash withdrawal or redemption by the holder. Example: Mobikwik Wallet

Semi-open System Payment Instruments
These are payment instruments that can be used to purchase goods and services at any card-accepting merchant locations (Point of sale terminals). These instruments do not permit cash withdrawal or redemption by the holder.

Open System Payment Instruments
These payment instruments can be used for purchase of goods and services and also permit cash withdrawal at ATMs, Merchant Local Locations, and automated business correspondents. Examples: Visa, Mastercard, RuPay

Mobile Prepaid Instruments
These are prepaid talk time instruments issued by mobile service providers. This talk time value can also be used to purchase 'value added service' from the mobile service provider or third-party service providers.

Eligibility

Banks and Non-Banking Financial Companies (NBFC), who comply with the eligibility criteria, would be permitted to issue all categories of prepaid payment instruments.

Only banks permitted to provide Mobile Banking Transactions by the Reserve Bank of India shall be permitted to launch mobile based prepaid payment instruments.

Other entities would be permitted to issue only closed system prepaid payment instruments and semi-closed system prepaid payment instruments.

Mobile Service Providers are permitted to issue mobile prepaid value. In addition to talk-value the use of such prepaid value as a payment instrument shall be restricted to the purchase of only such value added digital contents or services for use on the mobile phones. The use of mobile prepaid value for purchase of other goods and services shall not be permitted.
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