Reserve Bank of India (RBI) vide its circular dated 9th July, 2015 introduced a new category of semi-closed Prepaid Payment Instrument (PPI) with the following features:

• The semi-closed PPIs will be issued by the mass transit system operator (PPI-MTS) after authorization under the Payment and Settlement Systems Act, 2007 to issue and operate such semi-closed PPIs;
• The PPI-MTS will necessarily contain the Automated Fare Collection application related to the transit service to qualify as PPI-MTS;
• Apart from the mass transit system, such PPI-MTS can be used only at other merchants whose activities are allied to or are carried on within the premises of the transit system;
• The PPI-MTS issuer will ensure on-boarding of merchants (only those permissible as under (iii) above) following due procedure applicable to any other PPI issuer;
• The PPI-MTS will have minimum validity of six months from the date of issue;
• The issuer may decide upon the desired level of KYC, if any, for such PPIs;
• The PPI-MTS issued may be reloadable in nature and at no point of time the value/balance n PPI can exceed the limit of ₹ 2000/-;
• No cash-out or refund will be permitted from these PPIs;
• Funds transfer under the Domestic Money Transfer (DMT) guidelines will also not be applicable to these PPIs;
• All other extant guidelines for escrow arrangement, customer grievance redressal mechanism, agent/merchant due diligence, reporting and MIS requirements etc applicable to issue of PPIs would continue to be applicable in respect of PPI-MTS.

This was stated by Shri Jayant Sinha, Minister of State in Ministry of Finance in written reply to a question in the Lok Sabha today.

Semi-closed prepaid payment instruments for mass transit enable operator-issued reloadable cards with restricted merchant use and no cash-out. A new category of semi-closed Prepaid Payment Instruments (PPIs) allows authorized mass transit system operators to issue reloadable PPIs that include Automated Fare Collection, are usable only within the transit system and allied on-premises merchants, require issuer-led merchant onboarding under standard due-diligence, carry minimum six months' validity, permit issuer-determined KYC, prohibit cash-out or refunds, exclude Domestic Money Transfer applicability, cap stored value at Rs. 2000, and remain subject to existing escrow, grievance redressal, reporting and MIS requirements.