Everything you need to know about RBI’s latest decision for digital wallets

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In its monetary policy meeting on April 7, the Reserve Bank of India (RBI) made some critical announcements related to digital wallets in the country.

Aiming for maximum utilisation of digital payments banks, RBI said if the KYC requirements have been met, mobile wallets can facilitate interoperability for customer ease. Here are some other key decisions taken by the governing body with respect to mobile wallets.

Once the interoperability proposal is enforced, you will be able to transfer money to different wallets. For example, users of Paytm will be able to transfer money to the user of PhonePe without UPI assistance.

Currently, one can transfer money from a wallet to a bank account through UPI. It works on the principle of wallet-to-bank or bank-to-wallet or bank-to-bank transactions only.

Prepaid Payments Instrument (PPI) facilitates buying of goods and services, including fund transfer, financial services, and remittances, against the value stored on the instrument.

According to the RBI website, there are three types of PPI instruments. These include closed system PPI, semi-closed system PPI, and open system PPI. Wallets like Paytm, Mobikwik, PayU, etc. come under semi-closed wallets. Cash withdrawal is allowed only with open system PPI. These include debit cards and credit cards.

RBI said it will allow cash withdrawal from digital wallets as well as non-bank entities via prepaid cards. This will be possible only after the user completes his/her KYC process. At present, cash withdrawals are allowed only to KYC-compliant PPIs (Credit / Debit Cards) issued from banks.

 Another important decision by the RBI suggested that non-banks like fintech and payments bank can now offer Real-Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facility. It was available only in banks until now.