RBI adds rider to prepaid payment instrument rule

The Reserve Bank of India (RBI) on Thursday said banks issuing prepaid payment instruments to companies, for the use of the latter’s employees, may do so to only those listed on the local stock exchanges.

The banking regulator also specified that the existing rule, on any such instruments not being allowed to carry a value (at issue or after recharge/topping-up) of more than Rs 50,000 at any point of time, would continue for this class of use.

The rule issued on Thursday is a sequel to the general guidelines issued by RBI on November 4 last year, on the issue and use of prepaid instruments. Today’s rule change does not change the existing guidelines on issue to companies for other purposes or those for individual retail use.

 

Prepaid payment instruments are used to facilitate purchase of goods and services against the value stored on such instruments. These are already being issued by banks and non-banking finance companies approved by RBI in the form of smart cards, magnetic stripe cards, internet accounts, internet wallets, internet purses, mobile accounts, mobile wallets, mobile purses and paper vouchers.

As it happens, the RBI-appointed Damodaran panel on improvement of customer service by banks, made public only yesterday, had recommended that the cap on the maximum value at any time on individual prepaid instruments be raised above the Rs 50,000 cap specified in the November 2010 rules. "The committee's interaction with various stakeholders across the board has revealed that the present ceiling on withdrawals permitted against the stored value of the pre-paid instruments issued by banks is proving to be an obstacle in spreading usage of these instruments," the panel had said.

Adding: "Availability of prepaid instruments of higher value would find favour with frequent travellers and tourists." The Damodaran rules have been formally gazetted for public feedback till August 27.

RBI said while the primary responsibility about the identity of prepaid instruments' holders would remain with the company, banks would have to look into all customer service aspects related to these instruments.

"The bank should put in place proper systems to capture and maintain details of the employees to whom the cards are issued by the corporate, along with copies of the photograph and identity proof of such employees," RBI said.

A senior manager with a leading private bank said, according to his reading of the new rule, banks could issue these instruments for the specified purpose to companies not listed on local exchanges, too, but in such cases, the KYC (know-your-customer) verification responsibility would be with the bank, not the company.

RBI has said the company must make available bank account details of its employees to the prepaid instrument issuer bank. Banks are to facilitate transfer of funds from these instruments to a regular bank account of the employees concerned.

"These prepaid payment instruments shall be loaded only by debit to the bank account, which are subject to full KYC (know-your-customer) norms, maintained by the corporate with the same bank. Reloading of these instruments shall also be carried out only by debit to this account," RBI said.