Digital wallets to get fatter as RBI raises limit for prepaid payment instruments

To address the cash crunch, the Reserve Bank of India (RBI) on Tuesday introduced special measures to incentivise the use of electronic payments even further.

In line with its vision for a cashless economy, the government has increased the balance limit for digital wallets and prepaid instruments (PPIs) to Rs 20,000. Moreover, KYC PPIs available by authorised PPI issuers can continue to have Rs 1,00,000 in balances.

Also, merchants will now be able to transfer up to Rs 50,000 per month to their linked bank accounts without any transaction limit through these semi-closed PPIs. Further, PPIs should be issued to these merchants only after due verification and validation of their bank account details.

Earlier, the balance limit for these semi-closed PPIs was not more than Rs 10,000 during a particular month, with no particular guidelines for the opening of PPIs for such merchants.

The new measures will be effective between November 22 and December 30.

Wallets celebrating!

This comes as a bigger cheer of joy for PPIs or semi-closed wallet companies, which had already been demonstrating skyrocketing growth after the government’s decision to demonetise Rs 500 and Rs 1,000 notes, effective from November 8.

For instance, just on Monday, mobile payments company Paytm announced registering over seven million transactions worth Rs 120 crore in a day. In the last 10 days alone, the company was able to serve 45 million users with over five million new users added since the demonetisation drive.

Also, Paytm claimed to have expanded its merchant network by adding 1,50,000 merchants to its platform. As of Monday, the company claimed that 10 lakh offline merchants across India now accept Paytm as their payment mode.

About the RBI announcement, Vijay Shekhar Sharma, Paytm Founder, tweeted

At the other end, mobile wallet company, MobiKwik announced registering a 7,000-percent increase in bank transfers since it allowed users to transfer money instantly to any bank account at a zero-percent fee.

MobiKwik claims to have registered 18-fold growth in transactions since the announcement of demonetisation. At present, the company claims to have over one lakh merchants and 35 million customers and that it has witnessed a 40-percent increase in its mobile application downloads.

According to CEO Bipin Preet Singh, MobiKwik revised its monthly annualised gross merchandise value (GMV) sales target by 10 times to $10 billion by 2017. He said,

User traffic and merchant queries have also gone up by 200 percent since the announcement of currency notes ban on November 9.

FreeCharge, on the other hand, has seen a sustained 10x surge in the number of retail merchant sign-ups. In an official statement, it also claimed to have ramped up its acquisition efforts, aiming to on-board one million merchants in the coming 12 months.

The percentage of the first time users of Freecharge has seen a massive 15x surge, with an 8x surge in the wallet load transactions.

Commenting on this new initiative, Govind Rajan, Chief Executive Officer, FreeCharge said,

This is a big move for unorganised merchants. It will give them a real alternative to using cash and will promote the digital payment habit

Not limited to semi-closed wallets, PPIs can be also be issued as smart cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts, paper vouchers, and any instrument used to access a prepaid amount.