The Reserve Bank of India (RBI) has issued a notification disallowing non-bank prepaid payment instruments (PPIs) such as non-bank prepaid wallets and prepaid cards from loading credit lines — preset borrowing limits — into these platforms.
- This notification comes in the backdrop of a boom in credit instruments such as fintech-driven credit cards and buy-now-pay-later wallets.
Key highlights
- The RBI has clarified that its master direction on prepaid payment instruments (PPIs) does not permit loading of PPIs from credit lines.
- These companies typically tie up with banks or NBFCs and offer credit lines into their prepaid wallets.
What are prepaid payment instruments (PPIs)?
- Prepaid payment instruments (PPIs) are payment instruments that facilitate the buying of goods and services, including the transfer of funds, financial services, and remittances, against the value stored within or on the instrument.
- PPIs are in the form of payment wallets, smart cards, mobile wallets, magnetic chips, vouchers, etc.
- Banks and NBFCs can issue PPIs.
What is a credit line?
- A credit line is a preset borrowing limit that allows an individual or a business access to credit at any time, as per need.
- A credit line can be tapped into by the customer till the limit offered is not exceeded.
- It is like a flexible loan as against a lump-sum loan where a fixed amount is borrowed.
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