Interoperability is the technical compatibility that enables a payment system to be used in conjunction with other payment systems. The Reserve Bank of India (“RBI”) on October 16, 2018, issued much awaited Operational Guidelines for Interoperability in reference to Prepaid Payment Instruments (“PPI”)[1] to supplement with the provisions of Master Direction on PPIs. As a result, PPI holders can now seamlessly transfer funds from one wallet to another, from one merchant network to another. The implication involves the removal of the need to open a bank account. This is a positive move especially in light to the tightened KYC norms placed by RBI earlier this year in March 2018

Following are the salient features of the Guidelines.

Particulars Wallets Cards
Enabling/ affiliation through UPI Authorised Card Network
Enabling provision PPI holders shall be onboarded for UPI by their own PPI Issuer

PPI issuers to facilitate all basic features of interoperability. PPI Issuers to act as Payment Service Providers (“PSP”)[2] in the UPI[3]

Permits card networks to onboard PPI issuer to participate as members/ associated members of the network[4]
Facilitation of interoperability To all KYC compliant PPI accounts and the entire acceptance infrastructure.
Technical Requirements Adherance requirements of respective affiliators including those applicable to specific payment system such as technical requirement, governance etc
Reconciliation and consumer protection PPI to ensure adherance to all guidelines/ requirements in terms of reconciliation of positions at daily/ weekly basis or as the case may be

To also ensure all dispute resolution and customer grievance redressal mechanisms as prescribed by the card networks/ UPI

Manal Shah

[1] Prepaid Payment Instruments (PPIs) – Operational Guidelines for Interoperability DPSS.CO.PD.No.808/02.14.006/2018-19 dated October 16, 2018.

[2] Non Banking PPI issuers are also allowed to participate in the getting issued handles.

[3] For settlement, a non-bank issuer is enabled to participate through a sponsor bank. These issuers are required to meet all requirements of sponsor bank arrangement in UPI and of NPCI in this regard.

[4] Non-Bank PPI issuer is enabled to participate directly/ through a sponsor bank as the case may be. They are required to adhere to the requirements of the respective card network settlement system. Further, in view of issuance of interoperable cards in association with card networks for the first time, cards issued by these entities will ab initio be EMV Chip and Pin Compliant and the same has to be ensured by the bank who is also responsible for reissuance/ renewals.

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