The Reserve Bank of India (RBI) has granted permission for prepaid payment instruments (PPIs) to conduct UPI transactions through third-party apps. This marks a significant change from the previous rule, where UPI payments could only be made from bank accounts via the bank’s own UPI app or approved third-party applications. Payments involving PPIs, however, could only be processed through the issuer’s app.
In its regulatory announcement on April 5, 2024, the RBI clarified that this new policy applies exclusively to full-KYC PPIs, which can now perform transactions via third-party apps. This change enables PPI holders to send or receive funds using popular mobile applications like Paytm or Google Pay, bypassing the need for the issuer’s native app.
The RBI’s policy ensures that transactions conducted through third-party apps are verified through the issuer’s mobile platform, using the customer’s established PPI credentials. The transactions are pre-approved before being processed on the UPI system. Importantly, PPI issuers are restricted from bringing customers from different banks or other PPIs onboard. However, they can facilitate the discovery of their full-KYC PPIs on third-party platforms, allowing these users to link their PPIs to their UPI handles for smoother transactions.
This initiative is expected to increase the convenience and flexibility for users, providing a seamless experience across different UPI apps while managing funds within PPI wallets.
