What is virtual card/prepaid card?

What is virtual card/prepaid card?


Prepaid cards also known as virtual cards. They are issued by the banks and non bank entities against the value paid in advance by the cardholder. 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.

Closed System 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.

Semi-closed System PPIs can be 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.
Open System 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).

These virtual cards come with security features such as the Web and card PIN. As per extant instructions of RBI, the maximum value that can be loaded by any prepaid card at any point of time is Rs.100000/-.

The validity period of the prepaid cards varies from six months to one year depending upon the card issuing bank and purpose of the card. The card holder will have to redeem any unused balance within this time period.The prepaid cards can be issued in the form of gift cards. The maximum validity of the gift cards has been enhanced from one year to three years. Other provisions of PPI guidelines with respect to Gift Cards will continue to be applicable.

The prepaid instruments (PPI) are issued in the form of smart cards or chip cards, magnetic stripe cards, internet accounts, internet wallets, mobile accounts, mobile wallets, paper vouchers, etc.The prepaid cards issued by banks can be used to withdraw cash from an ATM, for the payment of purchase of goods and service at online purchases and at merchant establishments like Malls, Shops, Hospitals, Petrol bunks and other service providers.Prepaid cards can also be used for payment of utility bills and transfer funds to bank accounts, debit cards, credit cards within the country.Cards issued by non-bank entities: Prepaid cards are also issued by non-bank entities authorized by RBI like Airtel Money, ITZ cash e-wallet, Oxygen, Y Pay cash. But Cash withdrawals from such cards are not allowed. Prepaid card issued by non-bank entities can be used only for the purchase of goods and services at Point of Sale (POS) or E-commerce (online purchase).
Formalities for issuing prepaid cards:

These prepaid cards (virtual cards) come with security features such as the Web and card PIN. As per extant instructions of RBI, the maximum value that can be loaded by any prepaid card at any point of time is Rs.100000/-.Prepaid cards are issued on carrying out due diligence under KYC norms of a card holder.Small amount cardholder will be issued prepaid cards  Up to Rs.10,000/- by accepting minimum details of the customer provided the amount outstanding at any point of time does not exceed Rs 10,000/- and the total value of reloads during any given month also does not exceed Rs 10,000/-. These can be issued only in electronic form.
The prepaid card for Rs.10,001/- to Rs.50,000/- is issued  by accepting any ‘officially valid document’ defined under Rule 2(d) of the PML Rules 2005, as amended from time to time. Such PPIs can be issued only in electronic form. Only on full compliance of KYC prepaid cards can be reloadable up to Rs.50,000/-. However, the balance in the prepaid instrument should not exceed Rs.50,000/- at any point of a time. Prepaid cards can be used only domestically.
The visiting NRIs and foreign nationals to India can be issued the open system rupee denominated non-reloadable ‘Pre-Paid Instruments’ in electronic form. The cards can be issued by overseas branches of banks in India directly or by co-branding with the exchange houses/money transmitters up to a maximum amount of Rs.2 lakhs by loading from a KYC compliant bank account. Such PPIs should be activated by the bank only after the traveler arrives in India.Cash withdrawal from such PPIs will be restricted to Rs 50,000/- per month.The cards should be issued strictly for use in India and transactions settled in INR.An individual can hold only one card at a time and the card should be non- transferable. These PPIs may be used only for transactions permissible under the extant foreign exchange regulations.

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