It reduces the need to actually hold cash, giving a fillip to digitisation in the system.
The Reserve Bank of India (RBI) on Wednesday proposed to make interoperability mandatory for digital payments firms.
It also allowed users to withdraw cash from e-wallets and fintech companies to process RTGS and NEFT transactions.
The RBI expressed dissatisfaction over prepaid payment instruments’ (PPIs’) failure to migrate towards full-KYC (know your customer) PPIs, and therefore interoperability, even two years after guidelines were issued.
Hence, it proposed to make interoperability mandatory for full-KYC PPIs and for all acceptance infrastructure.
And, in order to incentivise the migration, it permitted the full-KYC PPIs to hold double the outstanding balance they can currently hold — from Rs 1 lakh to Rs 2 lakh.
PPIs are payment instruments that facilitate the purchase of goods and services, including financial services, remittance facilities, etc., against the value stored on such instruments.
Mandar Agashe, founder & MD, Sarvatra Technologies, said: “The proposition to make interoperability mandatory is an extremely positive move towards accelerating digital adoption within the country.
"In a post-Covid-19 era, increasing the maximum balance will help incentivise PPI operators to do full KYC.”
In another major decision, the RBI decided to extend the facility of cash withdrawal to full-KYC PPIs of non-bank PPI issuers as well.
So far, the cash withdrawal facility was allowed only for full-KYC PPIs issued by banks and this facility is available through ATMs and PoS terminals.
The rationale behind this move is to level the playing field between banks and non-banks PPI issuers.
This will also help achieve the comfort that one can access cash easily.
So it reduces the need to actually hold cash, giving a fillip to digitisation in the system, explained T Rabi Sankar, executive director, RBI.
Furthermore, the RBI has proposed to enable PPI issuers, white-label ATM operators, card issuers, Trade Receivables Discounting System platforms, to take direct memberships in centralised payment systems i.e real-time gross settlement (RTGS) and National Electronic Funds Transfer (NEFT).
Ketan Doshi, MD, Pay Point India, said: “By allowing wallet companies to participate in the centralised payments systems for RTGS and NEFT, the RBI has brought them almost on a par with bank accounts.
"Moreover, wallets can now effectively compete for micro-savings from the under-banked segments.”
Salman Waris, partner, TechLegis Advocates & Solicitors, said: “This could be a potential game-changer for fintech and payments firms.”
Vivek Belgavi, partner, fintech leader, PwC India, said: “PPIs and other players were holding settlement accounts with banks.
"Now, with this move of taking direct membership, it can have a negative impact on the banks’ float income... these (interoperability, doubling the limit...) are all encouraging measures.”
About the various instances of data breaches seen over the past few months, Sankar said the objective is to make the transactions as safe as possible.
