2. Definitions

For the purpose of this Master Direction, the following definitions shall be applicable:
 

2.1 Issuer: Entities operating the payment systems issuing PPIs to individuals / organisations. The money so collected is used by these entities to make payment to the merchants who are part of the acceptance arrangement and for facilitating funds transfer / remittance services.
 

2.2 Holder: Individuals / Organisations who obtain / purchase PPIs from the issuers and use the same for purchase of goods and services, including financial services, remittance
facilities, etc.
 

2.3 Prepaid Payment Instruments (PPIs): PPIs are payment instruments that facilitate purchase of goods and services, including financial services, remittance facilities, etc., against the value stored on such instruments. PPIs that can be issued in the country are classified under three types viz.

(i) Closed System PPIs,

(ii) Semi-closed System PPIs, and

(iii) Open System PPIs.
 

2.4 Closed System PPIs: These PPIs are issued by an entity for facilitating the purchase of goods and services from that entity only and do not permit cash withdrawal. As these instruments cannot be used for payments or settlement for third party services, the issuance and operation of such instruments is not classified as payment systems requiring approval / authorisation by the RBI.
 

2.5 Semi-closed System PPIs: These PPIs are used for purchase of goods and services, including financial services, remittance facilities, etc., at a group of clearly identified merchant locations / establishments which have a specific contract with the issuer (or contract through a payment aggregator / payment gateway) to accept the PPIs as payment instruments. These instruments do not permit cash withdrawal, irrespective of whether they are issued by banks or non-banks.
 

2.6 Open System PPIs: These PPIs are issued only by banks and are used at any merchant for purchase of goods and services, including financial services, remittance facilities, etc. Banks issuing such PPIs shall also facilitate cash withdrawal at ATMs / Point of Sale (PoS) / Business Correspondents (BCs).
 

2.7 Limits: All ‘limits’ in the value of instruments stated in the Master Direction, indicate the maximum value of such instruments, denominated in INR, that shall be issued to any holder, unless otherwise specified.
 

2.8 Merchants: These are establishments who have a specific contract to accept the PPIs issued by the PPI issuer (or contract through a payment aggregator / payment gateway)
against the sale of goods and services, including financial services.
 

2.9 Net-worth: Net-worth will consist of ‘paid up equity capital, preference shares which are compulsorily convertible into equity capital, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of assets but not reserves created by revaluation of assets’ adjusted for ‘accumulated loss balance, book value of intangible assets and deferred revenue expenditure, if any’. It shall be noted that while compulsorily convertible preference shares reckoned for computation of net-worth can be either non-cumulative or cumulative, these should be compulsorily convertible into equity shares and the shareholder agreements should specifically prohibit any withdrawal of this preference share capital at any time.