RBI issues guidelines for pre-paid instruments

MUMBAI: The Reserve Bank today came out with an approach paper for regulating issuance of pre-paid payment instruments such as smart cards, mobile purse and paper vouchers by banks and other entities.

With such instruments gaining popularity, the central bank has come out with guidelines, the comments on which have been invited by November 30. All the banks and non-banking financial institutions, meeting the regulatory capital adequacy norms, would be allowed to issue the instruments which can be used for purchase of goods and services, aftre obtaining permission from the RBI, the proposed guidelines said.

However, entities issuing payment instruments used by business establishments for use at that establishment only or for availing services from a service provider will not be included under the purview of the guidelines, the RBI said.

For avoiding the misuse of instruments like those used for purchase of goods etc (open system payment instrument) and semi-open syetem payment instruments, know-your-customers norm, anti-money laundering rules will be applicable to them.

Morever, instruments redeemable at a group of establishments associated with a particluar shopping mall, tourist resorts etc can be issued for up to Rs 500 without any KYC, the RBI said.

"These cards which include gift cards and travel cards, would be subjected to higher safeguards," the RBI said.
Such payment instruments can be used for transfer of funds online or using mobile networks and the issuer will have to put in place a systems for prevention and detection of frauds, the proposed guidelines said.