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The Reserve Bank of India (RBl) in its monetary policy committee (MPC)meeting said that now individuals can make payments from prepaid payment instruments like digital wallets using UPII that too through any third-party app. RBI Governor Shaktikanta Das has said wallet holders no longer have to depend upon the PPI wallet issuer to make UPI payments, rather individuals can use third-party apps to transact using a unified payment interface (UPI).
RBI Governor Shaktikanta Das said, "At present, UPI payments from bank accounts can be made by linking a bank account through the UPI App of the bank or using any third-party UPL application, However, the same facility is not available for PPIs. PPIs can currently be used to make UPl transactions only by using the application provided by the PPI issuer. To provide more flexibility to PPI holders, it is now proposed to permit the linking of PPIs through third-party UPl applications. This will enable the PPl holders to make UPlpayments like bank account holders. Instructions in this regard will be issued shortly.

Banking experts say PPI wallets are to become interoperable due to this new development. According to Sanjeev Moghe, President & Head - Cards andPayments, Axis Bank, "This will allow all Full KYC PPI Wallets to become inter-operable just like how bank accounts and RuPay credit cards operate where such instruments can be linked to any UPI App.
How is this likely to work?
FinTech experts say that this new development will bring PPIs at par with making UPI payments using a bank account. According to Jyoti Prakash Gadia, Managing Director, Resurgent India, "This will facilitate the linkage and usage of the PPI to make digital payments not only through a specific app but through any of the third party UPl applications like PhonePe, Google Pay, etc. This shall bring the PPIs to par with the bank accounts for a customer to make payments through third-party applications.
Gadia further says that customers shall now have the choice to park the funds in PPI to make payments rather than make frequent debits to their bank savings account."This will bring ease of making smaller transactions and avoid too many small transactions being routed through the savings accounts," he says.
"RBI mindset seems to be of broad basing UPl across the ecosystem to foster competition amongst other products and help fuel further innovation," says Vivek Lyer, Partner, Grant Thornton Bharat.
According to Rahul Jain- CFO, of NTT DATA Payment Services India, "India'sfntech landscape takes another leap forward. The RBI's decision to allow third-party UPI apps to make UPl payments from Prepaid PaymentInstruments (PPl) wallets constitutes a notable stride in this direction. This strategic measure will encourage digital transactions for small-value transactions, effectively curbing cash usage and fostering the growth of a cashless economy.
The key takeaway from this new development by the RBI is that now PPIwallet holders (Paytm, PhonePe, Freecharge, etc) can link their wallets with third-party UPI apps and make a payment. According to Dilip Modi, founder, of Spice Money, "RBI's announcement today grants PPl users the ability to seamlessly integrate their accounts with a wide range of UPI-enabled services, mirroring the convenience and flexibility traditionally reserved for standard bank account holders.
Banking experts also say that this new development will result in an increased volume of transactions in PPI wallets. "It will also allow further penetration given there were a lot of PPIs who had customers but never had a separate UPI App, now such instruments can be linked to the third-party application providers (TPAPs), and spending can be done using UPI App. We expect the PPI volumes to grow once these are made truly interoperable. There will be some changes for the customers given such transactions will now require a separate UPl PIN which needs to be generated. Previously, all such UPI PP Apps were using their mode of authorization," says Moghe.
Why did the RBI come out with such a development? Iyer explains what issues might have prompted the RBI to come out with this development regarding PPl wallets and UPl. He says, "RBI has done this development to ensure that organizational issues of PPl players do not impact the customers in terms of withdrawal of money stuck in their wallets. This provides flexibility to the customers to utilize the money that otherwise may be stuck in PPI wallets, due to issues beyond the control of the customers. This will force PPl players to innovate more on their reward and incentive structures to increase the stickiness of customers