RBI released draft rules for Prepaid Payment Instruments (PPIs) in December 2024, aimed at strengthening digital payment security and compliance. New regulations mandate enhanced KYC verification, stricter AML controls, and improved customer protection mechanisms. PPIs include wallets, gift cards, and travel cards issued by banks and non-banks. Draft allows 30-day public consultation period. Changes target reducing fraud risks, ensuring interoperability standards, and aligning with global payment security benchmarks for India's growing digital payments ecosystem.

The RBI's draft PPI rules represent a significant regulatory overhaul of India's digital payments infrastructure, addressing security vulnerabilities in the Rs 5.4 lakh crore prepaid instruments market. PPIs, which include mobile wallets like Paytm, PhonePe, and corporate gift cards, have grown exponentially but faced challenges around fraud prevention and regulatory gaps. The new framework mandates stricter customer verification processes, enhanced transaction monitoring systems, and standardized interoperability protocols. This regulatory tightening comes as India processes over 10 billion digital transactions monthly, making robust oversight crucial for financial stability. The rules particularly focus on non-bank PPI issuers, who dominate the wallet segment but operate under lighter regulatory frameworks compared to banks. Enhanced AML requirements will require real-time transaction screening and suspicious activity reporting. The interoperability mandate aims to break payment silos, allowing seamless fund transfers across different PPI platforms. These changes align with RBI's vision of a unified, secure digital payments ecosystem while protecting consumer interests and maintaining systemic stability in India's rapidly digitizing financial landscape.