Important Topic: Pre-paid Payment Instruments (PPIs)

Important Topics for Competitive Exams

Important Topic

Pre-paid Payment Instruments (PPIs) are payment instruments that facilitate transactions like purchase of goods and services, including funds transfer, against the value stored on such instruments. The value stored on PPIs represents the value paid by the holders by cash through a bank account etc. The prepaid instruments can be issued as smart cards, magnetic stripe cards, internet accounts, online wallets, mobile accounts, mobile wallets, paper vouchers and any such instruments used to access the prepaid amount.

PPI sector is regulated by the RBI and as per the RBI regulations, there are three types of PPIs:

(i) Closed system payment instruments: These are payment instruments issued by a person for facilitating the purchase of goods and services from him/her/it. Closed wallets are wallets which are issued by a company to a consumer for buying goods and services exclusively from that company.
Examples: Amazon Wallet, Cleartrip Wallet

(ii) Semi-closed system payment instruments: These payment instruments are redeemable at a group of clearly identified merchants that contract specifically with the issuer to accept the payment instrument. These instruments do not permit cash withdrawal or redemption by the holder.
Example: Oxigen Wallet, Mobikwik Wallet

(iii) Open system payment instruments (multipurpose cards): These payment instruments can be used for purchase of goods and services and also permit cash withdrawal at ATMs, Merchant Local Locations, and automated business correspondents.
Examples: Visa, Mastercard, RuPay.

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