Overview of Prepaid Wallet License

Within the framework of the dynamically evolving digital economy, Prepaid Wallet License is a significant factor contributing to the financial inclusion process and the minimization of a cash-based economy. With more and more consumers moving to mobile-based payments as well as online shopping, licensed wallet providers add to trust and security around online financial transactions.

A Prepaid wallet license which is also known as Prepaid Payment Instrument (PPI) license, which is granted in India by the Reserve Bank of India (RBI) under the Payment and Settlement Systems Act of 2007. This license will enable enterprises to issue and operate products that include e-wallet and prepaid card, digital wallets, and mobile wallets, where users can use it to put a value of money and exchange it (fund transfers, payments of goods and services etc.) in an electronic medium, instead of using cash.

The license will provide the fintech companies with a legal ability to operate in the digital payment market, allow innovation and make sure that digital transactions will be regulated, traceable and accustomed to a consumer.

Advantages of Prepaid Wallet License

• Entry into the digital payments market: The license enables you to enter the lucrative Indian financial technology (fintech) environment legally and offers you the opportunity to deploy digital wallets and connect to the UPI, NPCI networks and other bank APIs so that your payment services can be widely accepted and accepted.
• Revenue opportunity: Business can expect to earn revenue of transaction charges, merchant fee, and value added services and can enjoy increased customer outreach and marketing based on data.
• Easy and quicker payments: The prepaid wallets will facilitate immediate transfer of the funds and purchase, overcome the challenges of delay in payment (long queues in the banks to transfer funds etc.) and eliminate the payment of the correct change.
• Low operating expenses: These wallets tend to have little to no activation, monthly or annual fees in comparison to conventional modes of payment thus they are economically favourable, both to the provider and the user.
• More convenient to customers: Easy wallet top-up through net banking or credit cards, auto-payment on regular bills, the ease of storing funds virtually, and securing the wallet are convenient factors that offer full convenience to the customers. There is also a lesser chance of theft or loss of funds compared to the conventional wallets.
• Incentives and rewards: Most wallets will reward, provide bonuses, and cashback, which are other incentives that appeal to the consumer and keep them still using the wallet.
• Exposure and economic accessibility: Licensed wallets enable businesses to target a larger market including the unbanked and the underbanked, which promotes digital financial inclusion.

Types of Prepaid Wallets

• Open System Payment Instruments: Open System Wallets offer the widest functionality, including purchases and cash withdrawals at ATMs. Issued only by banks, they function like debit cards and are accepted universally. Examples include Visa, MasterCard, and RuPay cards. These wallets require the highest regulatory compliance and are suited for institutions with strong financial infrastructure.
• Semi-Closed System Payment Instruments: Semi-Closed Wallets can be used at multiple merchant locations that have agreements with the issuer. While they don’t allow cash withdrawal, they are widely accepted for transactions at partnered merchants. Examples include Paytm, PhonePe, Amazon Pay Wallets They require RBI approval, KYC compliance, and are ideal for fintech companies aiming for broad yet controlled digital payment solutions.
• Closed System Payment Instruments: Closed System PPIs are wallets issued by a company for exclusive use within its own services or platform. They do not allow cash withdrawal or use with external merchants. Examples include Rapido Wallet, Big Bazar Card, Metro Rail Cards. These wallets help businesses streamline payments, speed up checkouts, and build customer loyalty within a controlled ecosystem.

Who can start a Prepaid Payment Instrument (PPI):

• Companies Registered in India: Only entities incorporated under the Companies Act, 2013 are eligible to apply. If they mentioned to start prepaid wallet business in their objective clause of MOA.
• Banks and Non-Bank Entities: Banks can issue all types of wallets, including open wallets.
• Non-banking financial companies (NBFCs) and fintech companies can issue closed and semi-closed wallets only (not open wallets).
• Other Eligible Sectors: Fintech startups, e-commerce companies, telecom operators, and other technology-based firms commonly apply to launch wallet services.

Foreign entities can participate through an Indian subsidiary compliant with FDI rules.

Eligibility criteria for Prepaid Wallet License

• Minimum Net Owned Funds: Non-bank and non-NBFC entities must have a minimum net owned funds (NOF) of ₹5 crore to apply for the license. Banks and NBFCs must satisfy RBI's applicable capital adequacy requirements.
• Financial Background & Track Record: The entity must maintain a solid financial track record, demonstrating stability, growth, and compliance (clean history with no fraud or regulatory breaches).
• Compliance Framework: The entity must have robust systems to comply with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations. Effective customer identification and transaction monitoring are mandated.
• Technology Infrastructure & Security: Applicants need to demonstrate secure, scalable, and reliable technology infrastructure—including strong data protection, encryption, and routine security audits.

Documents Required for Prepaid Wallet License

• Certificate of incorporation
• Memorandum and Articles of Association (constitutional documents)
• Proof of registered office address
• Identity proof of the applicant
• Address proof of the applicant
• Details of all appointed directors
• Information of key managerial personnel
• Appointment letter of the statutory auditor
• Declaration or confirmation of statutory auditor designation
• Audited financial statements for the current financial year
• Details of existing banking relationships
• Bank account information
• Proposed capital structure with amount breakdown
• Report detailing the company’s principal business activities
• Comprehensive project report
• Business strategy plan
• Financial projections and revenue estimates for Indian operations
• Specifications of payment systems with workflow diagrams
• System interoperability and integration methodology
• Any other documents or information required by the Reserve Bank of India (RBI)

Procedure to Obtain a Prepaid Wallet License in India

• Application Submission:

It shall be required that the applicant shall make a formal application to Reserve Bank of India (RBI) in the specified form under Payment and Settlement Systems Act, 2007. All necessary documents required such as company incorporation documents, financial statements, business plan and the applicable application fees should be attached in the application.

• RBI initial Screening:

RBI reviews the application received to determine the eligibility of an applicant. This encompasses review of the financial healthiness, governance, readiness and technology of the potential to run a secure and efficient system of prepaid payment instrument (PPI).

• Grant of In-Principle Approval:

When RBI is contented with the preliminary examination, it grants an in-principle get together that lasts six months. The applicant must put in place requisite level of infrastructure, policies and processes to run the PPI business during this period.

• Submission of Final Documents and Audit Reports:

Prior to the lapse of the in principal-approval, the applicant is required to submit:

System Audit Report (SAR) that is issued by a qualified auditor to certify that it adheres to the rules of the RBI on the use of technology and security and operations.

Any other compliances documents as may be required by RBI.

In the case where the applicant fails to meet the requirement in the set six months period, a single extension can be given through valid request.

• Issuance of Final Authorization:

Then the final authorization/license is issued by RBI, after the documents and the audit reports are found satisfactory. Once this license is given, the applicant ought to open prepaid wallet business in a specified time allowed by RBI. Otherwise, it can lose the license.

Validity of Prepaid Wallet License

A prepaid payment wallet licence is generally valid for five years and is subject to review and possible revocation by RBI.