Goaltide Daily Current Affairs 2022

Mar 11, 2022

Current Affair 1:
Maternal Mortality Ratio (MMR) : Recent Report


India’s maternal mortality ratio (MMR) has improved to 103 in 2017-19, from 113 in 2016-18. This is according to the special bulletin on MMR released by the Registrar General of India March 14, 2022.

Current Affair 2:
Prepaid Payment Instruments in India


What are Prepaid Payment Instruments or PPIs?

Before we understand PPIs, it is important to understand the concept of embedded financing. In simple terms, embedded financing means integrating financial services into non-financial platforms with an objective to provide the users/clients with a seamless experience. The prime benefits of embedded financing are:

  • Enriched customer experiences with a ‘one-stop shop’ approach.
  • Increased revenues for businesses with the ‘Buy now Pay later’ kind of systems and insightful data on the working of the business model.

As we have seen, embedded finance is appealing to both the customers as well as businesses. PPIs are one kind of instrument of the embedded financing models. PPIs include m-wallets, cards, prepaid vouchers, and so on. The most popular among these is the m-wallet service. Wallet-as-a-service has gained traction in recent times, validating the compelling benefits it has to offer. In fact, digital wallets are slowly replacing physical wallets.

PPIs in India

The government of India enacted a legislation, ‘The Payments and Settlement Systems Act, 2007’ (the PSS Act). It is the country’s first statute devoted to overseeing and regulating the payment industry.

Types of PPIs

Primarily, PPIs can be classified into Small PPIs and Full KYC PPIs. The small PPIs (also known as minimum-details PPIs) can further be divided into,

  • PPIs up to Rs.10,000/- (with cash loading facility)
  • PPIs up to Rs.10,000/- (with no cash loading facility)

Alternatively, PPIs can be categorized into three types.

Closed System PPIs: These are issued to facilitate the purchase of goods and services only from the issuing entity. They also do not allow withdrawal of cash. Hence, these kinds of PPIs do not require any authorization from the RBI.

Semi-closed System PPIs: They also do not permit cash withdrawal but can be used at a group of merchant establishments that are contracted by the issuer entity, for purchases including financial services.

Open System PPIs: Issued by only banks, these can be used at any merchant establishment irrespective of the issuer and permit cash withdrawal for purchases including financial services. Such withdrawals can be made at ATMs or Point of Sale (PoS), like debit cards.

Growth of PPIs in India

The growth of PPIs has been steady and consistent since its introduction. The volume of PPI transactions has jumped from 30.6 million in 2011-12 to 4775 million in 2021-22 (up to December 2021). The corresponding increase in the value of PPI transactions is from Rs. 62 billion in 2011-12 to Rs. 2150 billion in 2021-22 (up to December 2021).


Limitations of PPIs

Though convenient, PPIs have certain limitations both from the customer standpoint as well as the regulatory standpoint.

Limited Credit availability: PPIs generally have limits on the transactions they provide. This could be justified in the sense that PPIs focus is mainly to provide services for individuals without access to banking facilities.

Capital requirement: The net worth of non-bank companies issuing PPIs is raised from Rs. 2 crores to Rs. 5 crores, making it difficult for small companies to enter and stay in the competition. Further, 3 years after authorization, net worth should be Rs. 15 crores/

KYC Compliance: The latest KYC requirements as well as the requirement to maintain a log of all the transactions of PPIs for at least ten years might further burden the companies.


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