RBI allows UPI payments via full-KYC wallets using third-party apps

The Reserve Bank of India (RBI) on Friday issued a notification allowing full-KYC prepaid payment instruments (PPIs) to access the Unified Payments Interface (UPI) through third-party applications.

"As announced in the Statement on Development and Regulatory Policies dated April 05, 2024, it has been decided to enable UPI payments from/to full-KYC PPIs through third-party UPI applications," the central bank said.

"This will enable PPI holders to make/receive UPI payments through the mobile application of third-party UPI applications," it added.

The RBI said the amendments to enable this functionality have been incorporated in the Master Directions on Prepaid Payment Instruments (MD-PPIs) issued on August 27, 2021.

Under the previous RBI instructions, wallets could only be linked to UPI using the wallet company’s own app and payments were authenticated using the wallet’s existing login details.

The RBI has made it easier for people using prepaid wallets to make payments through popular UPI apps like PhonePe, Google Pay, and Paytm.

On April 5, the central bank, in its statement on developmental and regulatory policies, proposed to allow the linking of PPIs through third-party UPI applications to provide more flexibility to PPI holders.

With the new rules, if your wallet is verified with full KYC (Know Your Customer), you’ll be able to link it to third-party UPI apps. This means you can use your wallet to send or receive money just like a bank account.

Full-KYC wallets can now be discovered on UPI apps like PhonePe or Google Pay. These wallets can be linked to the UPI system, and payments can be approved using the UPI PIN, similar to how bank accounts work.

However, under the revised instructions, the RBI clarified that wallet companies cannot onboard customers of other banks or wallets under this system.