PPI Deposit Insurance Coverage

  • A committee recommends extending Deposit Insurance and Credit Guarantee Corporation (DICGC) coverage to Prepaid Payment Instrument (PPI) holders to protect against fraud and unauthorised transactions.
  • PPI holders get a break: Acceptance of the recommendation would be a huge relief for PPI holders.
  • Prepaid Payment Instrument (PPI) Definition: PPIs are instruments that facilitate various financial transactions as well as the purchase of goods and services.
  • PPIs are classified into two types: tiny PPIs and full-KYC PPIs, which are issued as cards or wallets.
  • Options for loading/reloading: PPIs can be loaded/reloaded using cash, debit/credit cards, or bank transfers.

PPI Instruments Issuers

  • Authorised issuers include: PPIs can be issued by both banks and non-banks authorised by the RBI.
  • Authorised issuers include: PPIs can be issued and operated by Airtel Payments Bank, Axis Bank, Union Bank, and others.
  • Non-bank PPI issuers include Amazon Pay (India), Bajaj Finance, Ola Financial Services, and others.

Recommendations of the RBI Committee

  • DICGC cover examination request: The committee proposes that the DICGC cover be extended to bank and non-bank PPIs.
  • The purpose of the examination is as follows: Consideration of PPIs as deposits kept with regulated PPI issuers necessitates more investigation.

Understanding DICGC’s Role: DICGC, an RBI subsidiary, provides deposit insurance.

  • Depositor protection: The DICGC supports the financial system’s stability by safeguarding small depositors in the event of a bank failure.
  • DICGC covers commercial banks, payments banks, small financing banks, regional rural banks, and cooperative banks that are licenced by the RBI.

Coverage and Limits of DICGC

  • Savings, fixed, current, recurring, and accumulated interest deposits are all protected by the DICGC.
  • Maximum insurance limit: For combined principle and interest sums, each depositor is protected up to a maximum of Rs 5 lakh.
  • Increase in insurance cover: In 2020, the insurance cover was increased from Rs 1 lakh to Rs 5 lakh.
  • Total PPIs PPI Quantity as of March 31, 2023: There were 16,185.26 lakh PPIs in the system, including 13,384.68 lakh wallets and 2,800.58 lakh cards.
  • Transaction volume in FY2023: In FY2023, the total volume transacted through PPIs was 74,667.44 lakh.
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