- 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.
Source:https://indianexpress.com/article/explained/explained-economics/deposit-insurance-cover-for-ppis-how-will-customers-benefit-8648010/