These measures are aimed at leveling the playing field for non-bank payment operators and banks, while also reducing settlement risks by widening the ecosystem.
The central bank governor Shaktikanta Das in his Monetary Policy Committee (MPC) address said that fintech companies such as prepaid instrument issuers (PPIs), card networks and TReDS operators, among others, will now be allowed to become members of its centralised payment systems, such as RTGS and NEFT.
The move is significant as these channels, typically used for the processing of big-ticket interbank settlements and business payouts, have been accessible only by banks until now.
“Membership to the RBI-operated Centralised Payment Systems (CPSs) – RTGS and NEFT – is currently limited to banks, with a few exceptions,” Das said.
“It is now proposed to enable non-bank PSOs like PPI issuers, card networks, white label ATM operators and Trade Receivables Discounting System (TReDS) platforms regulated by RBI, to take direct membership in CPSs,” Das added.
According to experts, the move to open CPSs membership for non-banks will provide impetus for infrastructure growth and reduce settlement risks – just like the opening of UPI to third party aggregators.
“Given the exponential growth in digital payments, dominated by the UPI infrastructure, this move will allow better product innovation and integration. It will also reduce systemic risk for digital payments,” said Shilpa Mankar Ahluwalia, partner and head of fintech, Shardul Amarchand Mangaldas
RTGS or Real Time Gross Settlement System is typically used for transactions between businesses of over Rs 2 lakh. Its use by retail customers is limited even as the central bank made it operational round the clock in 2020.
Meanwhile, NEFT or National Electronic Funds Transfer is a pan-India payments system that allows the inter-bank transfer of funds. The central bank is set to issue a detailed circular on this.
The RBI on Wednesday also made it mandatory for digital wallets to be interoperable, while easing norms for full-KYC PPIs on cash withdrawals and account balance limits.
“To incentivise the migration of PPIs to full-KYC, it is proposed to increase the current limit on outstanding balance in such PPIs from ₹1 lakh to ₹2 lakh,” Das said.
RBI had issued guidelines in October 2018 for adoption of interoperability on a voluntary basis for full-KYC PPIs, but the migration toward interoperability has not been significant, Das added.
The limit on the account balance on these PPIs has been increased to Rs 2 lakh from the current Rs 1 lakh to convert more PPIs such as semi-KYC closed loop wallets into full KYC digital wallets.
RBI has also proposed to allow such full-KYC PPIs to be used for cash withdrawals. “This is to level the playing field between banks and non-banks PPI issuers,” said RBI ED Rabi Shankar in the post-MPC press conference. “The fact that PPI holders will have the comfort of knowing that they can access cash whilst holding balance in their PPI accounts will give fillip to digital payments,” Shankar added.
At present, cash withdrawal is allowed only for full-KYC PPIs issued by banks, such as debit and credit cards. Now with this proposal even a payment wallet or a prepaid card issued by the likes of Paytm and Mobikwik could be used to withdraw cash at ATMs, micro-ATMs and eligible Point of Sale terminals.
“The measure, in conjunction with the mandate for interoperability, will give a boost to migration to full-KYC PPIs and would also complement the acceptance infrastructure in Tier III to VI centres,” Das added.
Additionally, the central bank will also allow payments banks to increase the account limit for its customers to Rs 2 lakh from the current Rs 1 lakh. This is aimed at expanding the services of payment banks to small merchants and other businesses, Das said.