The Reserve Bank of India (RBI) on Friday allowed third-party UPI access for prepaid payment instruments (PPI). Now PPI holders will be able to make and receive payments through third party UPI apps.

Current system

Till now UPI payment can be made only from the bank account or through the concerned bank / third party UPI application. Payment from PPI was possible only through the application of the PPI issuer.

Reserve Bank issued a press release

The Reserve Bank has issued a press release regarding this. It states that this decision was taken under the RBI's regulatory policy of 5 April 2024. It said that UPI access would be allowed for prepaid payment instruments (PPI) through third party applications.

What are prepaid payment instruments?

A prepaid payment instrument (PPI) is a financial instrument that allows users to add funds to a card or digital wallet for future transactions. PPIs can be used to purchase goods, conduct financial services and deposit money.

The PPI issuer will enable only its full-KYC PPI holders to make UPI payments by linking their customers' PPIs to their UPI handles. UPI transactions from the PPI will be validated using the customer's existing PPI credentials on the issuer's application. In this way, such transactions will be pre-authenticated before reaching the UPI system.

UPI is a rapidly growing trend

The Finance Ministry has informed that the Unified Payments Interface (UPI) has achieved more than 15,547 crore transactions worth Rs 223 lakh crore from January to November this year.