On April 22, 2026, the Reserve Bank of India put out a draft set of rules governing Prepaid Payment Instruments — the category that covers digital wallets, prepaid cards and similar products. The RBI called for public feedback by May 22, describing the exercise as an effort to build "a conducive framework for long term growth of PPIs with enhanced security of transactions".
That is a reasonable enough summary of what the document is trying to do. But anyone who reads the actual provisions carefully will find that the proposed changes go considerably further than that framing suggests.
The overall structure of the draft is thoughtfully designed. The new version reorganises the rules into chapters, making them easier to navigate. It links to the 2025 KYC rules rather than copying them out again, which reduces clutter. It sets clearer eligibility standards for the people who run PPI companies. It changes the way companies calculate how much money they need to keep in escrow — moving from a fortnightly count to a monthly one, which is more practical. And it lets banks that already issue debit cards offer PPIs without having to go through a separate approval process. These are sensible tidying-up measures for a sector that has grown considerably over the past decade.
The more consequential parts of the draft, however, point in a different direction. The product at the centre of this is the Full-KYC PPI — a wallet that users can access only after completing full identity verification. Under the 2021 rules, this was treated as a reasonably capable payments product, one that could handle meaningful volumes of everyday transactions. The new draft appears to pull that back significantly, through four changes that individually might seem minor but together represent a meaningful tightening.
First, a person can now hold only one Full-KYC PPI at a time — something the existing rules do not explicitly restrict. Second, the monthly cap on transfers between individuals using a Full-KYC PPI drops to Rs 25,000 in total. This replaces a more generous framework under which you could send up to Rs 2 lakh per month to a pre-registered recipient, with a lower Rs 10,000 limit for other transfers.
Third, the limit on loading cash onto a wallet falls from Rs 50,000 a month to Rs 10,000 — in line with the RBI's long-standing preference for moving away from cash transactions, so perhaps the least surprising of the four. Fourth, a new Rs 2-lakh monthly ceiling now applies to both how much money sits in the wallet at any point and to the total amount that flows through it in a month. The ceiling itself is not new in absolute terms, but limiting monthly throughput means a busy wallet user — someone receiving salary, paying bills, and sending money home — can quickly run into the cap.
Taken together, these four moves effectively convert a Full-KYC PPI from something closer to a bank account substitute into something closer to a conventional prepaid card — useful for limited purposes but not for managing a working household's finances. The people most likely to feel this are those who rely on digital wallets precisely because they do not have easy access to bank accounts: workers in the unorganised sector whose salaries are paid into wallets, gig economy workers receiving platform payouts, and families who depend on regular transfers from relatives working in other cities. The draft does not explain the reasoning behind these specific tightenings, leaving readers to work backwards from the numbers.
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The most plausible explanation is concern about financial crime — specifically, the use of digital wallets to move money in ways that obscure its origins, sometimes through layered transfers involving multiple accounts. That concern is legitimate, and it probably also explains why the draft separately blocks the practice of loading a Full-KYC PPI using a credit card, except for specific permitted purposes.
But there is a reasonable argument that the same concerns could have been addressed through better transaction monitoring and risk-based supervision of individual issuers, rather than across-the-board product limits. The 2021 rules had already introduced a pre-registered beneficiary system partly for this reason, and there is no publicly available evidence that it failed.
Beyond the Full-KYC changes, the draft also redraws the boundary of who needs RBI authorisation to offer prepaid instruments. Currently, if a business issues a stored-value product only for purchases from itself, it does not need RBI approval.
The draft now removes this exemption for "marketplaces" — broadly defined as platforms that connect buyers and sellers. The intent behind this makes sense: a large e-commerce platform with millions of users and billions of rupees in stored wallet balances is, for all practical purposes, running a payments business and probably should be regulated as one.
The problem is that the definition is wide enough to capture a much broader range of businesses — B2B procurement portals, service aggregators, loyalty programme operators — none of whom appear to be the actual target of this change. The draft sets no minimum size threshold and offers no transition period, which could create compliance headaches for businesses that had no reason to expect this rule to apply to them.
The draft's handling of cross-border transactions is also a source of some confusion. One section appears to ban cross-border use of PPIs outright. A few paragraphs later, the same document introduces a PPI product designed specifically for foreign nationals and non-resident Indians, which can be loaded in foreign currency and refunded in foreign currency on departure — an inherently cross-border arrangement.
The more significant issue, though, is the apparent removal of a facility that currently allows banks to credit incoming international remittances of up to Rs 50,000 directly into a recipient's Full-KYC PPI. This facility existed to serve a practical need: it let workers abroad send money home to family members who may not have a fully functional bank account. Whether its removal was deliberate or an oversight is not clear from the draft, and it is one of the questions that will presumably need to be clarified in the final rules.
Read as a whole, the draft reflects two somewhat different policy impulses. The structural reforms — better organisation, cleaner cross-references, sensible housekeeping — are genuinely welcome. But the substantive restrictions on Full-KYC PPIs, the ambiguity around cross-border use, and the broad drafting of the marketplace exclusion sit awkwardly alongside the RBI's stated aim of supporting long-term growth and its own Payments Vision 2028 document, which had set ambitious targets for digital financial inclusion.
How the final rules resolve that tension will matter a great deal — not just for companies in the payments space, but for the millions of people who depend on prepaid wallets as their primary financial tool. The consultation window has now closed. The final direction, when it comes, will tell us which of the two impulses in this draft won out.
The article has been authored by Anubhav Ghosh, partner in the financial regulatory practice; and Rohtash Kumar Singh, director, financial regulatory practice-risk and compliance, at Trilegal.
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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