The Reserve Bank of India has officially released a comprehensive draft Master Direction on Prepaid Payment Instruments (PPIs), marking a significant regulatory overhaul designed to streamline the digital payments landscape in India.
Issued in April 2026, this draft framework seeks to replace the existing 2021 guidelines, introducing tighter compliance norms for non-bank issuers while simultaneously expanding the functionality and use cases of digital wallets and prepaid cards.
As the central bank invites public comments until May 22, 2026, the proposed directions signal a strategic push toward enhancing consumer protection, reinforcing the security of transaction infrastructure, and fostering greater interoperability across the digital economy.
At the core of the new regulatory proposal is a heightened focus on the stability and governance of non-bank PPI issuers. To ensure that only financially sound entities operate within the ecosystem, the RBI has mandated that new non-bank applicants must maintain a minimum net worth of ₹5 crore at the time of authorization.
This threshold is required to be scaled up to ₹15 crore within three years of operation, a move that enforces long-term commitment and operational resilience. Furthermore, the draft reinforces strict escrow account management, requiring issuers to maintain clear segregation of customer funds in accounts held with scheduled commercial banks, with balances that must constantly match the outstanding value of the PPIs to protect user interests.
The draft framework also brings significant clarity to transaction limits and wallet segmentation, aiming to balance usability with prudent risk management. Full-KYC PPIs will continue to allow an outstanding balance limit of ₹2 lakh, with an equivalent monthly debit cap to facilitate seamless high-value transactions. In contrast, small PPIs, designed for lower-risk usage, are restricted to a maximum balance of ₹10,000, with no facility for fund transfers or cash withdrawals.
A notable evolution in the proposal is the formal recognition and regulation of special-purpose PPIs. This includes transit-focused instruments with perpetual validity, gift PPIs capped at ₹10,000, and a dedicated category for foreign nationals and NRIs.
These “One World” style UPI-linked wallets will allow international visitors to load funds via foreign exchange and perform person-to-merchant (P2M) payments during their stay in India, with monthly transaction limits set at ₹5 lakh, further aligning India’s payments infrastructure with global travel needs.
Interoperability remains a central theme of the 2026 draft, as the RBI doubles down on the integration of wallets with the broader payments ecosystem. Full-KYC PPI issuers are mandated to facilitate interoperability via both card networks and the Unified Payments Interface (UPI). By enabling the discovery of PPIs on third-party UPI applications, the RBI aims to improve the visibility and utility of these instruments.
To enhance the overall user experience and trust, the draft also institutes robust customer protection measures. This includes clear, multilingual disclosure of all fees and terms at the point of issuance and the integration of PPI issuers into the RBI’s Integrated Ombudsman Scheme for grievance redressal. The proposal also mandates that refunds for failed or cancelled transactions must be credited immediately to the PPI, even if such credits temporarily breach the wallet’s prescribed balance limits.
Finally, the RBI is taking a pragmatic approach to dormant accounts and transaction security. PPIs that remain inactive for one year will be classified as inactive, and if left unreactivated for a subsequent year, the issuer will be required to close the account and return the balance to the source account or a verified bank account.
This move is designed to reduce the risk of misuse associated with long-dormant wallets. As the industry reviews these comprehensive guidelines, the clear focus of the Reserve Bank is to move from a generic operational model to a more nuanced, risk-based, and customer-centric framework that ensures prepaid instruments remain a safe, reliable, and integral part of India’s digital financial future.
Key Highlights:
- Comprehensive Regulatory Update: The RBI has issued the draft Master Direction on PPIs 2026 to replace the 2021 norms, emphasizing enhanced security, tighter escrow management, and long-term operational stability for non-bank issuers.
- Expanded Utility and Scope: The proposal introduces specialized wallets for foreign nationals and NRIs, integrates transit and gift PPIs, and mandates interoperability through UPI and card networks to boost digital payments adoption.
- Refined Compliance and Limits: New capital requirements for non-bank issuers (₹5 crore to ₹15 crore) and tiered transaction caps (₹2 lakh for Full-KYC wallets) aim to standardize market operations while maintaining risk-based controls.
- Enhanced Consumer Protection: The draft mandates immediate refunds for failed transactions, includes PPI issuers under the Integrated Ombudsman Scheme, and introduces clear protocols for closing inactive wallets after two years of non-usage.
