RBI’s New PPI Draft Directions: Redefining India’s Digital Wallet Ecosystem

The Reserve Bank of India (“RBI”) has introduced a significant regulatory proposal through the release of the Draft Master Direction on Prepaid Payment Instruments (PPIs) on April 22, 2026. The draft framework seeks to consolidate and replace the existing 2021 Master Directions in order to better align the regulatory regime with the evolving digital payments ecosystem in India.

The RBI has invited comments and feedback from regulated entities, industry participants, and the public, with submissions currently proposed to be accepted until May 22, 2026.

Revised Classification and Transaction Limits

Under the proposed framework, PPIs are broadly categorized into General Purpose PPIs and Special Purpose PPIs.

General Purpose PPIs

General Purpose PPIs include the following two sub-categories:

• Full-KYC PPIs — These may carry an outstanding balance limit of up to ₹2 lakh, subject to compliance with applicable KYC and prudential requirements.
• Small PPIs — These are proposed to remain subject to tighter usage restrictions, including limitations on merchant payments and prescribed balance thresholds.

Special Purpose PPIs

Special Purpose PPIs are intended for limited and specific use cases, including categories such as:

• Gift instruments
• Transit-related payment instruments

Each category is subject to separate usage conditions and value caps under the draft framework.

PPIs for Foreign Nationals and Non-Residents

The draft directions further contain provisions relating to issuance of PPIs to foreign nationals and non-residents visiting India. These provisions include prescribed transaction limits and enhanced verification requirements relating to passports, visas, and other officially valid documents.

Stricter Prudential Standards for Non-Bank Issuers

To strengthen the financial resilience of the PPI ecosystem, the RBI has proposed enhanced prudential requirements for non-bank PPI issuers.

Minimum Net Worth Requirements

Under the draft framework, non-bank entities seeking authorization would be required to maintain a minimum positive net worth of ₹5 crore at the time of application. This must subsequently be increased to ₹15 crore within a prescribed transition period.

Escrow and Fund Segregation Obligations

The draft directions also continue the requirement that customer funds be maintained in an escrow account with a scheduled commercial bank.

Issuers would additionally be expected to undertake periodic reconciliation and ensure that customer balances remain appropriately segregated from operational funds in accordance with RBI safeguards.

Enhanced Interoperability and Consumer Protection

Interoperability Requirements

A key feature of the proposed framework is the continued emphasis on interoperability within the digital payments ecosystem. Full-KYC PPIs are proposed to be interoperable across authorized card networks and the Unified Payments Interface (“UPI”), subject to applicable technical and regulatory requirements.

The draft framework also contemplates transaction-level safeguards and risk mitigation measures, including limits on certain forms of cash loading and enhanced monitoring obligations for issuers.

Consumer Protection Measures

While the RBI has not yet finalized all aspects of customer liability and unauthorized transaction treatment under the proposed directions, the framework seeks to strengthen consumer protection through:

• Clearer disclosure obligations
• Refund mechanisms
• Operational transparency requirements

Future Outlook for India’s Digital Payments Ecosystem

The proposed framework signals the RBI’s broader regulatory objective of promoting greater:

• Standardization across digital payment instruments
• Interoperability between platforms and networks
• Prudential discipline across India’s rapidly expanding digital payments sector

By strengthening governance standards, customer fund protection mechanisms, and interoperability requirements, the RBI aims to create a more resilient and transparent ecosystem for both issuers and consumers.

Stakeholders are expected to closely review the draft directions and assess the operational, compliance, and technological implications of the proposed changes before the consultation process concludes.