Prepaid Payment Instruments for Mass Transit System (PPI-MTS)

The Reserve Bank of India (RBI) released final guidelines on semi-closed PPI for Mass transit systems. It is a new category of semi closed systems, allowing balances upto Rs 2000. More importantly, it allows the PPI to be used at other merchants where activities are in the premises of the MTS.

What this means is, that an Indian Railway, or a Delhi Metro can issue prepaid cards that can be used not just for their own tickets, but also at IRCTC canteens, other food and drink vendors, licensed bookshops etc that operate within the premises. Since these are major users of micro-payments, it will increase convenience if linked to the people's ability to buy tickets online using their mobile phones etc. 

As a public good, if MTS do not charge an MDR on the transactions, it would lead to better adoption across all types of vendors. Cheaper contactless PoS will drive better and faster adoption. 

A side benefit of this, as adoption and usage is increased, is that 

• unlicensed operators in the MTS premises will not be able to accept this PPI, and accordingly be exposed that they are unlicensed. 
• Railways and other MTS operators will get a better understanding of how much business is done by the licensees, and can accordingly make changes to the licensing norms. 
• The cash float available to MTS can add up to a material amount. 
• Reduction of cash handling expenses and infrastructure is an expected outcome out of such actions. 

Till now, prepaid cards were issued in conjunction with banks, or as smart cards that could be used only for fares. This is a radically new move that will get duplicated hopefully in other emerging economies. 

From the RBI Press Release dated July 9, 2015:

The Reserve Bank of India (RBI) today placed on its website the final guidelines on Prepaid Payment Instruments for Mass Transit System (PPI-MTS) enabling the issuance of a separate category of semi-closed prepaid payment instruments for mass transit systems. The PPI-MTS will enhance commuter convenience and will also facilitate the migration to electronic payments in line with the country’s vision of moving to a less-cash society.

The PPI-MTS can be used within the mass transit systems and will have a minimum validity of six months from date of issue. Such PPIs will be reloadable instruments subject to an outstanding limit of ₹ 2,000/- at any point of time. Apart from the mass transit system, such PPI-MTS can be used at other merchants whose activities are allied to or are carried on within the premises of the transit system.

It may be recalled that the Reserve Bank had placed on its website the draft circular on “Prepaid Payment Instruments (PPI) for Mass Transit System (PPI-MTS)” on May 28, 2015 for public comments till June 15, 2015. This new category of semi-closed PPIs has been introduced taking into account the requests received from various segments, including providers of mass transit services, such as, metro train and road transport services, indicating the need for PPIs catering to the requirements of this segment to enhance commuter convenience.