Prepaid cards · PPI programmes
Money loaded first, rules decided by the type
A prepaid card looks simple: load it, spend it. What it can do (who can hold it, how much, whether it can send money or withdraw cash) is set by which kind of prepaid instrument it is. Choose the type first; the programme follows.
| Feature | Own-store creditClosed-system | Minimum detailsSmall PPI | KYC completedFull-KYC PPI | One-time giftGift PPI |
|---|---|---|---|---|
| Regulated by RBI as a payment system | No | Yes | Yes | Yes |
| Customer details | Issuer's choice | Minimum details, OTP-verified mobile | Full KYC | Purchaser's KYC kept by issuer |
| Maximum outstanding | Issuer's choice | ₹10,000 | ₹2,00,000 | ₹10,000 per instrument |
| Buy goods and services | Only from the issuer | Yes | Yes | Yes |
| Transfer funds | No | No | Yes, within limits | No |
| Withdraw cash | No | No | Yes, within limits | No |
| Reloadable | Issuer's choice | Yes | Yes | No |
What a prepaid instrument is
RBI calls them prepaid payment instruments, or PPIs: cards or wallets that hold money paid in advance and are used to pay for goods and services. The money sits with the issuer, not in a bank account in the holder's name, and the issuer is responsible for it until it's spent, refunded or redeemed.
RBI's Master Directions on Prepaid Payment Instruments (issued 27 Aug 2021, updated 27 Dec 2024) set out who may issue them, what customer details are needed, how much they may hold, and what they may be used for. Instruments usable only at the issuer's own business, closed-system PPIs, sit outside that regime; everything usable more widely sits inside it.
Issuer
A bank, or a non-bank authorised by RBI, that issues the instrument and holds the money.
Programme owner
The business whose customers or employees use the cards, and who designs the programme.
Card network or UPI
Carries payments to merchants; required for interoperability of full-KYC PPIs.
Holder
The person using the card or wallet.
The types, in plain terms
Closed-system PPIs
Store credit and similar instruments usable only to buy the issuer's own goods or services, with no cash withdrawal and no third-party payments. RBI doesn't classify them as payment systems requiring authorisation, and doesn't regulate or supervise them.
Small PPIs
Issued with minimum details, including a mobile number verified by OTP. Only for buying goods and services; no fund transfers or cash. Up to ₹10,000 outstanding, with monthly and yearly loading limits, and they must be converted to full-KYC within the period RBI sets or stop accepting new credits.
Full-KYC PPIs
Issued after completing KYC. Reloadable, up to ₹2,00,000 outstanding, and usable for purchases, fund transfers and cash withdrawal within RBI's limits. They must be interoperable: wallets through UPI, cards through authorised card networks.
Gift PPIs
Up to ₹10,000 per instrument, not reloadable, no cash-out or transfer, though funds can go back to the source account with the holder's consent. The issuer keeps the purchaser's KYC details.
From RBI's Master Directions on PPIs. Other categories exist, such as PPIs for mass transit; issuers may set limits below RBI's ceilings.
Designing a programme
A prepaid programme is a set of decisions that follow from one question: what do you want the money to be able to do? If holders only need to buy things, a simpler instrument may do. If they need to send money or withdraw cash, the programme needs full-KYC instruments, and KYC becomes part of onboarding every holder.
Write the rules down before choosing an issuer, because they decide which issuer and which instrument fit.
- 1Who holds the cardsEmployees, customers, partners, gift recipients.
- 2What they can doBuy only, or also transfer and withdraw cash.
- 3Where they can spendAnywhere cards are accepted, or only certain categories.
- 4How they're loadedBy you, by the holder, or both; from which source.
- 5How long balances lastValidity, expiry warnings, and what happens to leftovers.
- 6Physical, virtual or bothPlastic for in-person spend, virtual for online and instant issue.
What businesses use prepaid programmes for
| Use | Why prepaid | Watch for |
|---|---|---|
| Employee expenses | Spend is capped at what you load; no reimbursement claims to process | Receipts and categorisation for accounting |
| Gifts and rewards | A fixed value the recipient spends where they like | Gift PPIs are capped and can't be reloaded |
| Customer refunds or credits | Instant credit without a bank transfer | The customer must want it; refunds to the original method are the default |
| Field staff and agents | Money for fuel, travel or supplies, controlled centrally | Card controls and cash-withdrawal rules |
| Benefits programmes | Allowances loaded monthly | Tax treatment is a question for your adviser |
Where the money is at each step
The question finance teams ask first is “whose money is it, and where is it?”. Once loaded, it's held by the issuer on the holder's behalf, not in your bank account. That changes how you account for it, and what happens to unspent balances.
- 01
Load
Money moves from your account (or the holder's) to the issuer.
- 02
Hold
The issuer holds it; the card shows the balance.
- 03
Spend
Card payments settle to merchants through the network.
- 04
End
Spent, returned to source, redeemed, or held after expiry.
Expiry, redemption and leftover balances
Every prepaid instrument has a validity period, and RBI's directions protect holders when it ends. The issuer has to warn the holder at reasonable intervals during the 45 days before expiry, by SMS, email or another means in the language the holder chose at issue.
Money doesn't simply vanish at expiry. A non-bank issuer can't transfer an expired PPI's outstanding balance to its profit and loss account for at least three years, and whenever the holder asks for it after expiry, it has to be paid to them in a bank account. For a programme owner, that means designing a clear end-of-life: what holders are told, and how leftover money is returned.
Before expiry. Warnings during the last 45 days, as RBI requires.
At closure. Balance back to the source account, or to the holder's own verified account where the type allows.
After expiry. Balance still claimable; a non-bank issuer can't book it as income for at least three years.
Controls that make a programme safe
Prepaid is often chosen because it limits exposure: nobody can spend more than was loaded. Programmes add controls on top to keep spend where it belongs. Which controls are available depends on the issuer and the card network.
Channel switches
Turn online, in-store, contactless or international use on or off.
Spend limits
Per transaction, per day, per month, below RBI's ceilings.
Merchant categories
Allow only the kinds of merchant the programme is for.
Instant block
Holder or admin can freeze a lost card at once.
Unauthorised transactions and who bears them
RBI's directions set out customer liability for unauthorised transactions on PPIs, much as bank-account rules do (bank issuers follow those bank rules directly). For non-bank issuers, a holder bears nothing where the issuer was at fault; where the holder was negligent, for example by sharing their payment credentials, they bear the loss until they report it, and the issuer bears anything after that.
For a programme owner, the practical point is reporting: holders need a quick, obvious way to block a card and report a transaction, and your support team needs to know how the issuer handles it.
Publish how to block a card and report a transaction, in the app and on the card carrier. Reporting time is what decides liability.
Reconciling a programme
Three balances have to agree: what you loaded, what holders spent (plus fees), and what the issuer says is still on the cards. Reconcile loads against your bank statement, spend against the issuer's transaction reports, and outstanding balances against the issuer's statement, monthly at least. For expense programmes, also match spend to receipts and cost centres, which is usually where the real work is.
Physical, virtual, or a wallet
The same programme can reach holders in different forms. A physical card works at shops and terminals and suits field staff or gift recipients who expect something in hand. A virtual card exists only as card details in an app, can be issued the moment a holder is approved, and suits online spend and subscriptions. A wallet lives in an app and pays through UPI once it's full-KYC.
Many programmes start virtual, so holders can spend on day one, and send plastic later to those who need it. Printing and delivering cards adds cost and time, and a card that arrives at the wrong address is a card someone else could activate, so delivery and activation need their own checks.
| Form | Good for | Consider |
|---|---|---|
| Physical card | In-person spend, fuel, travel | Printing, delivery, activation |
| Virtual card | Online spend, instant issue | Holders need the app to see details |
| Wallet | App payments and UPI | UPI access needs full-KYC |
Running the programme day to day
Launch is the easy part. What makes a programme work, or not, is the everyday handling of people joining, leaving, losing cards and asking questions. Decide each of these before the first card goes out.
Someone joins
How they're invited, how KYC is collected if the type needs it, and when the first load happens.
Someone leaves
Block the card on their last day, then return or reclaim the balance as the programme's terms allow. Write this into the terms before issuing.
A card is lost
Holder blocks it in the app at once; a replacement is issued and the balance moved across.
A payment is disputed
Who the holder contacts, what the programme team does, and how the issuer's process works.
The budget changes
How loads are adjusted, and whether existing balances are affected.
The programme ends
Holders are told in advance, balances are returned, cards are closed.
Where programmes go wrong
Picking the type after the features. A programme designed around cash withdrawal, then issued on an instrument that doesn't allow it, has to be rebuilt.
No plan for leavers. Cards stay active and balances sit unclaimed when nobody owns the offboarding step.
Loading more than people need. Every rupee on a card is money you no longer hold. Load for the period, not for the year.
Terms nobody read. Charges, expiry and what happens to leftover money must be disclosed clearly to holders; make sure yours are, in the languages they use.
A worked example: expense cards for a field team
A distributor with twenty sales staff on the road replaces cash advances with prepaid cards. Staff need to pay for fuel, meals and small supplies, but never need to send money to anyone or withdraw cash. Here's how the decisions above play out.
| Decision | Choice | Reason |
|---|---|---|
| Type | Instruments that allow purchases only | No transfers or cash needed, so the simplest suitable type |
| Form | Virtual first, physical on request | Fuel stations and small shops often need a card in hand |
| Loading | Each Monday, to a weekly budget | Keeps little money sitting on cards |
| Controls | Domestic only; online off | The spend is in person, in India |
| Receipts | Photo in the app within two days | Month-end stays manageable |
| Leavers | Card blocked on the last day; balance returned to the company | Written into the programme terms from the start |
Illustrative only. Which instrument types, controls and return options are available depends on the issuer and on RBI's rules for each type.
Where Peneu fits
Prepaid instruments are issued by banks and by non-banks RBI has authorised; the issuer holds the money and the regulatory responsibility. Whether Peneu offers a prepaid programme, through which issuer, and with which controls and reports, is confirmed during onboarding. Nothing here says Peneu issues PPIs or holds card balances.
Questions for a prospective issuer
- 01Which PPI types do you issue, and under which RBI authorisation?
- 02How is holder KYC done for full-KYC cards, and how long does it take?
- 03Which controls (channels, limits, merchant categories) can we set, and can holders change them?
- 04How are unauthorised transactions reported and handled?
- 05What reports do we get for loads, spend and balances?
- 06What happens to balances at expiry and when the programme ends?
What is a prepaid payment instrument (PPI)?
A prepaid card or wallet loaded with money in advance and then used to pay. In India, instruments that can be used beyond the issuer's own business are regulated by RBI as payment systems under its Master Directions on Prepaid Payment Instruments, and can be issued by banks and by non-banks that RBI has authorised.
What is the difference between a small PPI and a full-KYC PPI?
A small PPI is issued with minimum customer details and can only be used to buy goods and services, with an outstanding balance of up to ₹10,000. A full-KYC PPI is issued after completing KYC, can hold up to ₹2,00,000, and can also be used for fund transfers and cash withdrawal within the limits RBI sets.
Are store gift cards regulated the same way?
Not always. A closed-system PPI, usable only to buy the issuer's own goods and services and with no cash withdrawal, isn't classified by RBI as a payment system requiring authorisation. A gift card usable at other merchants is a gift PPI, capped by RBI at ₹10,000 per instrument and not reloadable.
Can a business issue its own prepaid cards?
A business can run a card programme, but the instrument itself is issued by a bank or an RBI-authorised non-bank PPI issuer. The business typically designs the programme, the users and the rules, while the issuer holds the regulatory responsibility and the funds.
What happens to money left on an expired prepaid card?
RBI's directions require issuers to warn the holder during the 45 days before expiry, and non-bank issuers can't move an expired PPI's outstanding balance to their own profit and loss account for at least three years from expiry. If the holder asks for it back at any time after expiry, it has to be paid to them in a bank account.
Do prepaid cards work everywhere?
Full-KYC PPIs have to be interoperable: wallets through UPI and cards through authorised card networks, per RBI's directions. Where a particular card can be used also depends on the programme's own rules, such as merchant categories the programme allows.
Are employee meal or benefit cards taxed differently?
That's a tax question, not a card one. How a benefit loaded on a card is treated depends on tax rules and your policy; confirm it with your tax adviser before designing the programme.
Does Peneu issue prepaid cards?
Prepaid instruments are issued by banks and RBI-authorised non-banks. Whether Peneu offers a prepaid programme, and through which issuer, is confirmed during onboarding. Nothing on this page states that Peneu issues PPIs.
Official sources
- RBI — Master Directions on Prepaid Payment Instruments (27 Aug 2021, updated 27 Dec 2024)PPI types, limits, interoperability, gift PPIs, expiry warnings and unclaimed balances.
Last reviewed . Examples, amounts and screens marked illustrative are not Peneu figures.