PPI licence: how wallets and prepaid cards are regulated by RBI

A prepaid payment instrument is a way to pay that holds money the customer has already put in. A mobile wallet is the common example. So are a prepaid card given by a company to its staff for meals, a transit card and a gift card. The company that issues it needs an authorisation under the Payment and Settlement Systems Act 2007, and the RBI grants it. That authorisation is what people call a PPI licence.

The idea behind the rule is customer money. When a wallet holds balances, the issuer is holding other people's cash. The RBI wants that cash backed by a real bank account, the issuer to be financially sound, and the customer identified well enough to keep misuse in check.

The RBI sorts PPIs by where they can be used and by how well the holder has been identified. The first split is closed, semi-closed and open systems. The second split is by KYC (know your customer, the identity check).

As per the RBI Master Direction on Prepaid Payment Instruments issued in 2021 and amended since, the main types are these, as of November 2026.

• Closed system PPI: usable only with the issuer, such as a retailer's store credit or a single operator's travel card. It does not need an RBI authorisation.
• Semi-closed PPI: usable at a group of merchants or locations that have a contract with the issuer, which is the usual wallet. It needs authorisation.
• Open system PPI: a card or wallet usable at any merchant and for cash withdrawal, issued only by banks.
• Small PPI: minimum identity details taken, with a low balance cap.
• Full-KYC PPI: the holder has completed full KYC, with a higher cap and more uses.

Limits are the part that shapes how fintech wallets are designed. A small PPI is meant for light use. A full-KYC PPI looks more like a payment account.

The figures below come from the RBI direction and from published summaries of it, and the RBI has proposed changes more than once, so confirm the live numbers on the RBI site before relying on them.

• Small PPI: outstanding balance capped at ₹10,000 at any time, with a limited validity period and conversion to full KYC expected within a set time.
• Small PPIs cannot be used to send money out to bank accounts or to withdraw cash.
• Full-KYC PPI: balance cap of ₹2,00,000 at a time.
• Full-KYC PPIs can be used to transfer funds to a bank account, within limits, and for some cash withdrawal.
• Interoperability: full-KYC PPIs must work across wallets and card networks, with wallets linked to UPI (Unified Payments Interface, the national instant payment network).

A non-bank company applies to the RBI. Under the 2021 direction it must be an Indian-incorporated company and must meet a minimum net worth (the value of the business after subtracting liabilities). As widely summarised, that is ₹5 crore at the time of applying and ₹15 crore by the end of the third financial year after authorisation, to be maintained after that. These are the thresholds most commonly cited, so a founder should check the current direction before planning capital.

The RBI also looks at the promoters' track record, the business plan, the technology and cyber security set-up, and whether customer funds will sit in an escrow account with a scheduled bank. Foreign investment is allowed in PPI issuers within the foreign direct investment rules. The approval has an initial validity, and the issuer applies again close to the end of it.

Banks do not need this licence. They issue PPIs under their own banking licence after informing the RBI.

A wallet earns when people load it and spend from it. The main lines are small and add up only at scale.

Merchant fees on wallet payments come first, although the zero-charge policy on UPI has pushed many companies toward other income. Interchange income from prepaid cards is another line. Some issuers earn from corporate cards, payouts to gig workers, and gift and benefit programmes sold to employers. Float income (interest on balances held in a bank) is limited because the RBI controls where the escrow money can sit.

Many well-known names in Indian payments hold a PPI authorisation, among them PhonePe and Amazon Pay, as listed on the RBI's website under authorised payment system operators. The list changes, so look at the RBI page for the current one.

Licences can also be lost. The RBI has in past years restricted or cancelled authorisations when an issuer failed on KYC, on net worth or on its audit trail. Paytm Payments Bank faced curbs in 2024, which shows how a regulator can stop a wallet's activity even when the app itself is popular. A reader should treat a headline about an RBI action on a wallet as a signal about compliance, not about the company's size.

A wallet holds a balance with the issuer, within the caps above. A bank account holds a deposit with a bank, and in India deposits up to ₹5 lakh per depositor per bank are insured by the Deposit Insurance and Credit Guarantee Corporation. Wallet balances do not carry that deposit insurance in the same way, which is one reason the RBI wants them capped and tied to an escrow account.

A wallet also cannot lend your money out. A bank can. That difference is why the RBI regulates the two so differently.

Check whether the story is about an issuer losing authorisation, a limit changing, or a company applying. Ask whether the figure is a balance cap or a transaction cap, and which KYC tier it applies to. A fintech that says it has a wallet may in fact be a distribution partner of a licensed issuer, which is a different thing from holding the licence itself.

Also ask which KYC tier a number refers to, and whether a news item concerns the issuer, a bank partner or an app that only distributes the product.

This page is general information, not legal advice, so check with a qualified professional before acting on any of it.