In a major move that will further promote fintech services in India, the Reserve Bank of India (RBI) proposed the linkage of Prepaid Payment Instruments (PPIs) such as digital wallets via third-party Unified Payments Interface (UPI) applications.
The central bank, after discussion in the Monetary Policy Committee meeting, issued a statement saying that currently, UPI payments from bank accounts can be enabled by linking bank accounts using the UPI app of banks or that of the third-party application. The same, however, does not exist in the case of PPIs. It opined that PPIs can drive UPI transactions only through the application offered by their issuers.
In a bid to enhance flexibility for PPI holders, the RBI proposed linking PPIs via third-party UPI applications. Should it come to effect, PPI holders can make UPI payments the way bank account holders do. The RBI, while issuing a statement, said that it will shortly come up with instructions on the same.
The proposed move, whenever in effect, will benefit Paytm, PhonePe, MobiKwik, Freecharge and several other companies that offer digital wallet services.
The soaring UPI transactions, month after month, may have influenced the RBI to come up with a proposed move allowing PPI services through UPIs. Statistically speaking, UPI transactions surged 55% to 13.44 billion in March 2024 from 8.7 billion during the same month last year. The latest proposal from the RBI aligns with the strategy of the National Payments Corporation of India (NPCI) to achieve 100 billion monthly UPI transactions in the near future.
YFS Sheds Light on RBI's Move
The latest move from the RBI is in sync with the flagship 'Digital India' mission launched by the government years ago to promote the digital economy in the country. It will help digital wallet service providers gain more customers, who, in turn, would get more payment options for their purchases, reckons Your First Startup (YFS).