RBI Allows UPI Payments via Third-Party Apps for Prepaid Payment Instrument (PPI) Holders + Banking_SBI_Clerk?.ToString()?? Banking_SBI_Clerk?.ToString()+" Current Affairs";

Context
In a significant development to enhance digital payment flexibility, the Reserve Bank of India (RBI) has permitted full-KYC prepaid payment instrument (PPI) holders to make and receive Unified Payments Interface (UPI) payments through third-party mobile applications. This move, announced in a circular on December 27, aims to bridge the gap between PPIs and UPI platforms, offering more convenience to users.
Key Highlights of the Circular
Linking PPIs with UPI Handles:
PPI issuers can now allow holders of full-KYC PPIs to link their PPIs to their UPI handles.
Transactions will be pre-approved before being processed on the UPI system, ensuring enhanced security.
Authentication Process:
UPI transactions initiated from a PPI issuer’s app will be authenticated using the customer’s existing PPI credentials.
Restrictions on Onboarding:
A PPI issuer cannot onboard customers of any bank or another PPI issuer, ensuring focused facilitation of payments through their issued instruments.
What This Means for Users
Greater Flexibility:
PPI holders, including users of gift cards, metro rail cards, and digital wallets, can now make and receive UPI payments using third-party UPI apps.
Previously, UPI transactions for PPIs were restricted to the issuer’s app.
Equity with Bank Accounts:
With this provision, PPI holders enjoy similar transactional flexibility as bank account holders on UPI platforms.
Improved Interoperability:
By allowing third-party apps to process PPI-based UPI transactions, the system fosters greater integration between financial instruments.
Background and Development
Earlier Scenario:
UPI payments could be carried out from/to a bank account using the bank's app or third-party UPI apps. However, PPI-linked UPI payments were restricted to the app provided by the PPI issuer.
RBI’s April Proposal:
In April, the RBI proposed the integration of PPIs with third-party UPI apps to promote flexibility and enhance user experience.
Current Implementation:
The new circular formalizes this integration, extending UPI capabilities to PPI holders through third-party apps.
About UPI and PPIs
UPI:
India’s premier digital payment platform, UPI, facilitates instant inter-bank transactions via mobile phones. It is managed by the National Payments Corporation of India (NPCI).
PPIs:
Prepaid Payment Instruments are tools for purchasing goods and services, conducting financial transactions, and remittances. These include gift cards, metro rail cards, and digital wallets, backed by stored value.
Significance of the Move
Enhanced User Convenience:
Expands the usability of PPIs for everyday transactions.
Boost to Digital Payments Ecosystem:
Strengthens UPI’s role as India’s leading real-time payment platform.
Financial Inclusion:
Promotes the adoption of digital financial services across a broader segment of the population.
Conclusion
The RBI’s decision to enable UPI payments for PPI holders via third-party apps is a progressive step towards a more inclusive and flexible digital payments ecosystem. This move aligns with India’s vision to promote a cashless economy, empowering users with seamless and secure payment options.

Source: RBI Circular