The Reserve Bank of India (RBI) has allowed holders of pre-paid payment cards to deposit school and college fees and pay taxes up to the limit of Rs. 10,000.
Till now, pre-paid cards—also called semi-closed system payment instruments—were used to buy air and train travel tickets. They were also used to pay utility bills and for payments related to essential services.
The pre-paid cards are used as alternatives to cash and cheques. These cards are mostly issued by banks and non-banking financial companies (NBFCs) on payment of specified amount. These cards can be issued without separate know your customer (KYC) due diligence procedures being undertaken by the issuer.
“Semi-closed system payment instruments which permit only payment of utility bills/ essential services / air and train travel tickets; and recurring payment of college fees, school fees, government taxes up to a limit of Rs 10,000/- can be issued without separate KYC being undertaken by the issuer,” RBI said in a notification on 14th June.
“The persons issuing such instruments may ensure that these instruments are made acceptable only at institutions which maintain the full identity of the customers,” the notification added.
These instruments do not permit cash withdrawal by the holder. The RBI has also doubled the limit for issue of semi-closed prepaid payment instruments to Rs. 2,000 against any identity document furnished by the customer. This is, however, subject to reporting of annual turnover/suspicious transactions.