RBI directed Banks to issue prepaid Payment Instruments to listed Corporates

In a circular issued on 4 August 2011 the Reserve bank of India declared that prepaid payment instruments such as smart cards, magnetic stripe cards, mobile wallets paper vouchers, gift cards and travel cards could be issued by banks only to corporates listed in India. Prepaid payment instruments could be issued only to corporate entities listed in any of the stock exchanges in India.

The corporate entities would have to verify the identity of the employee to whom the card would be issued, along with copies of photograph and a proof of identity. Also, the corporate are required to provide details of bank accounts of the employee to the bank.

RBI mentioned that the maximum value of an individual prepaid payment instrument should not exceed Rs.50000. The money in the prepaid instruments would be loaded by debit to the bank account after fulfilling all know-your-customer (KYC) norms.

The central bank had in 2009 allowed all banks and non-banking financial institutions (NBFC), meeting the regulatory capital adequacy norms, to issue the instruments which can be used for purchase of goods and services.

Corporates usually avail themselves of this facility from the bank for onward issuance to their employees. Prepaid payment instruments facilitate purchase of goods and services against the value stored in it and the value 
The central bank directed the banks to transfer funds from such prepaid instruments to a regular bank account of the employee if the same has been requested for.

Banks are expected to put in place additional features for authentication of all card-not-present (CNP) transactions performed over the telephone or via the post by 1 May 2012.