The RBI has released the Draft Master Direction on Prepaid Payment Instruments (2026 Draft), with comments invited until 22 May 2026.
It proposes to replace the 2021 Master Directions for Prepaid Instrument (PPI) issuers, as part of RBI’s broader effort to consolidate and streamline its regulatory framework. The draft is less a wholesale rewrite of the PPI framework and more a mix of regulatory clean-up and targeted recalibration. While several proposed changes simply consolidate or clarify existing requirements, proposals around tighter loading and transfer limits, restrictions on credit-card loading, and removal of cross-border functionality could have meaningful product implications if adopted. At the same time, measures such as expansion of UPI One World and easier bank entry into the PPI space may open up new opportunities.
Here are the key takeaways:
1. Some duplicative requirements have been removed: One notable drafting change is that provisions already covered under other RBI frameworks have been pared back or removed. Requirements relating to areas such as KYC, outsourcing, customer protection and fraud risk management, to the extent already governed under separate RBI directions, are no longer repeated here.
2. Revised PPI classification: The draft recasts existing PPIs into two broad buckets:
(a) General Purpose PPIs: include Full-KYC PPIs (issued after complete KYC) and Small PPIs (issued after light KYC and only used for merchant payments).
(b) Special Purpose PPIs: include Gift PPIs, Transit PPIs (earlier PPI-MTS), PPIs for Foreign Nationals/NRIs (UPI One World), and any other specific-purpose PPIs approved by RBI.
This is largely a clean-up. The underlying rules for each PPI category remain largely unchanged.
3. Tightening of loading norms and fund transfer limits
(a) Cash top-ups into Full-KYC wallets: The monthly limit has been cut sharply from INR 50,000 to INR 10,000, to address anti-money laundering concerns.
(b) Credit card loading restricted: With a view to curb ‘loan-loaded PPIs’, it is proposed that credit cards can now be used only for Special Purpose PPIs, while loading of General-Purpose PPIs is limited to bank account debit, cash or another PPI. This signals a clear intent to ring-fence credit-backed spending to specific use cases.
(c) Person-to-person transfers (bank accounts or wallets): A uniform INR 25,000 monthly cap now applies. Under the 2021 framework, transfers to pre-registered beneficiaries go up to INR 2,00,000 per month. The removal of higher threshold may require redesign for products built around larger-value transfer flows.
4. Statutory auditor certification for net worth compliance: The draft introduces a procedural clarification by requiring non-bank PPI applicants to submit a certificate from their statutory auditor confirming compliance with the minimum net worth criteria of INR 5 Crores. While the threshold itself remains unchanged, earlier a CA certificate was required; the draft now specifically mandates certification by the statutory auditor.
5. Cross-border use – removed entirely: The draft proposes that INR-denominated PPIs should no longer support cross-border transactions. This would mark a departure from the 2021 Directions, which permit certain bank-issued Full-KYC PPIs to be used for purchases abroad and allowed inward remittances into PPIs. If the proposed change is retained, PPIs would effectively become domestic-only instruments.
6. UPI One World: The draft proposes to continue the UPI One World framework for PPI issuance to foreign nationals and NRIs visiting India, while increasing the monthly spend limit from INR 2,00,000 to INR 5,00,000. If implemented, this could expand the utility of the product and create new opportunities for issuers.
7. Banks may get an easier path to issue PPIs: The draft proposes that banks already permitted to issue debit cards may issue PPIs by informing the RBI, without separate prior approval. If finalised, this would lower entry barriers for banks looking to enter the PPI space.
8. Dormant PPIs – now subject to mandatory closure: Under the proposal, a PPI with no transactions for one year would be treated as inactive, and if inactivity continues for two years, the PPI would need to be closed and the balance returned to the customer.
This would be a shift from the 2021 Directions, which recognised inactivity but did not prescribe a closure timeline.
9. Computation of core portion: The draft also proposes to relax the methodology for calculating the ‘core portion’ of a non-bank PPI issuer’s escrow balance. Instead of being computed fortnightly over 26 fortnights, it would move to monthly computation over 12 months.
Author Credits: Fintech Team - Aparajita, Astha, Sidharth, Samyukta
Image credits: AI-generated
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