RBI PPI draft rules 2026: New limits, KYC, capital

What the RBI has proposed

The Reserve Bank of India (RBI) has proposed a comprehensive overhaul of norms governing Prepaid Payment Instruments (PPIs) as digital wallets, prepaid cards, and related instruments scale up across India. The central bank has issued a draft Master Direction on PPIs and invited comments from regulated entities, stakeholders, and the public until May 22, 2026. The draft is positioned as a replacement for the existing 2021 guidelines, with a sharper focus on security, standardised operations, governance, transparency, and customer protection.

The proposed framework applies to all authorised issuers and system participants in the PPI ecosystem. RBI said it has undertaken a comprehensive review of extant guidelines as part of continued efforts to create a more conducive framework for long-term growth of PPIs with enhanced transaction security. The measures cover eligibility and issuance norms, limits and usage rules, interoperability expectations, refunds, disclosures, grievance redressal, and operational safeguards.

Who can issue PPIs under the draft

Under the draft, a bank permitted by RBI to issue debit cards can issue PPIs, subject to prior intimation to the Department of Payment and Settlement Systems (DPSS), Central Office, RBI, Mumbai. Non-bank entities can also issue PPIs, but only after authorisation from RBI. The draft also indicates a move to grant authorisations for payment system operators on a perpetual basis, removing the need for periodic renewals and aiming to provide greater regulatory clarity.

RBI’s proposed direction also reiterates operational expectations for non-bank issuers, including maintenance of funds collected against issuance of PPIs in a separate escrow account (in INR) with a commercial bank in India. The framework emphasises daily matching of outstanding balances with escrow balances.

Entry norms and capital requirements for non-banks

A key change in the draft is the minimum net-worth requirement for non-bank applicants entering the PPI business. A non-bank applicant must have a minimum net worth of ₹5 crore and submit a certificate from its statutory auditor. The issuer must then attain a minimum net worth of ₹15 crore by the end of the third financial year of authorisation.

The RBI’s stated intent is to push for stronger financial resilience among non-bank payment operators that hold customer funds and manage high-frequency retail payments. For existing and prospective issuers, these thresholds can influence business plans, capital allocation, and timelines for scaling.

Transaction limits and balance caps: full-KYC versus small PPIs

The draft refines transaction and balance limits to balance usability with risk controls. For general purpose PPIs and full-KYC PPIs, RBI proposed that the amount outstanding should not exceed ₹2 lakh at any point of time. It also proposed cash loading limits for such PPIs of ₹10,000 per month. Separately, the draft text also mentions peer-to-peer transfers being restricted to ₹25,000 per month.

Small PPIs, which involve minimal KYC, remain under tighter restrictions. The draft notes a ₹10,000 balance cap for small PPIs, and that they will not offer facilities for fund transfers or cash withdrawals. The framing keeps small PPIs closer to low-risk, limited-utility payment instruments.

Specific categories: gift PPIs, transit PPIs, and NRIs

RBI’s draft continues to recognise multiple PPI categories and assigns explicit caps for specific-purpose instruments. The maximum value of a Gift PPI should not exceed ₹10,000. For Transit PPIs, the outstanding cap proposed is ₹3,000.

The draft also includes provisions for issuance of a PPI wallet to foreign nationals or NRIs, after physical verification of passport and visa, for person-to-merchant (P2M) payments during their stay in India. Loading is proposed against receipt of foreign exchange by cash or through any payment instrument. RBI proposed that total amount debited from such PPI during any month should not exceed ₹5 lakh.

Interoperability push via UPI and card networks

A significant policy push in the draft is around interoperability. RBI proposed that a PPI issuer should facilitate interoperability with a card network or Unified Payments Interface (UPI), on the issuer side, for holders of Full-KYC PPIs, subject to conditions prescribed by the respective network provider. The draft also allows that a PPI issuer may facilitate discovery of PPI on third-party UPI mobile applications.

At the same time, the text notes that cross-border usage of PPIs remains disallowed, reflecting a cautious stance on international usage.

Refunds, failed transactions, and immediate crediting

RBI proposed that refunds in case of failed, returned, rejected, or cancelled transactions should be applied to the respective PPI immediately, even if such refunds result in exceeding the prescribed limits for that specific PPI category. The draft also adds that refunds of transactions done using any other payment instrument would not be credited to PPI.

This immediate-refund requirement is aimed at reducing customer friction and disputes for failed digital transactions, while still keeping the broader limit framework intact.

Customer protection: disclosures, grievance redressal, ombudsman

Customer protection is a central pillar of the revised framework. RBI proposed that a PPI issuer should disclose all features, associated charges, validity period, and terms and conditions in clear and simple language, preferably in English, Hindi, and the local language, at the time of issuance.

The draft also proposes that issuers maintain robust grievance redressal systems and come under RBI’s Integrated Ombudsman Scheme. It adds that agents of the PPI issuer should not impose any charges on customers. The draft also includes norms for limiting customer liability in unauthorised PPI transactions.

Operational controls: escrow discipline and inactive account rules

On operations, RBI proposed that non-bank issuers maintain escrow accounts with scheduled commercial banks and match outstanding balances on a daily basis. The draft also introduces clearer rules for inactive accounts: PPIs will be deactivated after one year of inactivity and closed after an additional year if not reactivated, with remaining balances transferred back to the source account.

These steps align operational hygiene with customer protection, especially for dormant wallets where users may lose track of balances.

Industry view: Spice Money on guardrails and trust

Dilip Modi, Founder and CEO of Spice Money, said the draft PPI guidelines are a timely step to strengthen trust and discipline in digital payments. He pointed to clearer guardrails around security, grievance redressal, and issuer norms as important for sustainable growth. He also noted that while UPI leads retail payments, PPIs continue to serve distinct use cases, including assisted models that bridge trust and access gaps.

Key proposals at a glance

Why the draft matters for payments and fintech

The draft Master Direction signals RBI’s attempt to standardise how PPIs operate as products become more interoperable and widely used. Higher net-worth requirements for non-banks and perpetual authorisations address structural issues of stability and regulatory continuity. Meanwhile, tighter rules on disclosures, refunds, and grievance redressal seek to reduce customer harm in routine payment failures.

The interoperability mandate for full-KYC PPIs via UPI or card networks is one of the most consequential elements because it reshapes how wallets and prepaid balances can be used across platforms. But the draft also maintains firm boundaries, including disallowing cross-border usage of PPIs.

Conclusion

RBI’s draft PPI Master Direction proposes higher entry thresholds for non-bank issuers, clearer caps for different PPI categories, mandatory interoperability for full-KYC PPIs, and tighter customer protection rules on refunds, disclosures, and grievance redressal. Stakeholders can submit comments on the draft until May 22, 2026, after which RBI is expected to move towards finalising the updated framework.