RBI Updates UPI Rules – PPIs Can Now Be Accessed Through Third-Party Apps

Highlights

• RBI allows UPI payments to and from prepaid payment instruments (PPIs) via third-party apps.
• Full-KYC PPIs can now be accessed through third-party UPI apps like Google Pay or PhonePe.
• This update is expected to make digital payments more seamless and versatile.

The Reserve Bank of India (RBI) has introduced a significant update to the Unified Payments Interface (UPI) system. Users can now make and receive UPI payments to and from prepaid payment instruments (PPIs) via third-party apps enhancing flexibility and convenience.

UPI transactions involving a PPI like a digital wallet previously could only be done using the app provided by the PPI issuer. For example, Paytm wallet users had to use the Paytm app for UPI payments.

The RBI’s statement included in its Development and Regulatory Policies update dated April 5, 2024, confirms that full-KYC PPIs can now be accessed via third-party UPI apps like Google Pay or PhonePe.

The RBI stated in the statement, “A PPI issuer shall enable holders of only its full-KYC PPIs to make UPI payments by linking its customer PPIs to its UPI handle. UPI transactions from PPI on the issuer’s application shall be authenticated using the customer’s existing PPI credentials. Such a transaction will, thus, be pre-approved before it reaches the UPI system. A PPI issuer in its capacity as a PSP shall not onboard customers of any bank or any other PPI issuer.”

The statement further clarified, “A PPI issuer may also facilitate the discovery of its full-KYC PPIs on third-party UPI mobile applications, who, in turn, shall enable such PPIs to be linked to their PSP handle/s. Such UPI transactions, from PPIs using third-party UPI applications, shall be authenticated using the UPI credentials.”

A prepaid payment instrument (PPI) like a digital wallet or card allows users to store funds for future transactions. With this update:

• You can transfer or receive money in your wallet using any UPI app, not just the one provided by the PPI issuer.
• For example, if you have funds in your Paytm or Google Pay wallet, you can now use another UPI app like PhonePe to manage your wallet transactions.

This new rule is expected to improve the user experience by making digital payments more seamless and versatile.

FAQS

Q1. What recent update has the RBI introduced to the UPI system?

Answer. The RBI now allows UPI payments to and from prepaid payment instruments (PPIs) via third-party apps enhancing flexibility and convenience.

Q2. Can I use third-party apps like Google Pay or PhonePe for PPI transactions?

Answer. Yes, full-KYC PPIs can now be accessed via third-party UPI apps like Google Pay or PhonePe allowing UPI transactions from these PPIs.

Q3. What is the expected impact of the new RBI rules on digital payments?

Answer. This update is expected to improve the user experience by making digital payments more seamless and versatile enabling users to transfer or receive money using any UPI app.

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