Proposed alterations to India’s prepaid payment system could have unintended effects on digital payments, financial inclusion, and consumer transactions, as per a report by Pahle India Foundation. The report emphasizes the need for a balanced, risk-based approach that matches compliance requirements with actual risks and advocates for maintaining low-value, high-frequency transactions. It suggests conducting regulatory impact assessments before significant policy changes and implementing them gradually to allow market players to adjust.
Major discussions in the industry revolve around the Reserve Bank of India’s draft directions on prepaid payment instruments (PPIs) and their implications for consumers, merchants, fintech companies, and the digital payments ecosystem. Drawing from six years of RBI payment data, the report highlights that PPI volumes in FY 2025-26 reached 98,699 lakhs, establishing a crucial part of India’s digital payments infrastructure. These instruments facilitate numerous transactions annually, spanning consumer payments, e-commerce, gig economy services, and financial inclusion initiatives.
Prepaid payment instruments play a vital role as an entryway into the digital economy for new users, offering seamless payment solutions that complement India’s digital infrastructure. They are particularly beneficial for gig workers, small businesses, and underserved populations, contributing to the significant surge in RBI’s Digital Payment Index from 217.74 in September 2020 to 516.76 in September 2025 – marking a 137% increase over eleven consecutive periods of growth. Dr. Suyog Dandekar, Senior Economist at Pahle India Foundation, stressed the importance of maintaining a balanced regulatory framework that supports ongoing adoption while enhancing consumer protection and operational resilience.
A well-calibrated regulatory strategy can uphold the advantages provided by PPIs while addressing the evolving challenges posed by the rapidly expanding digital payments landscape, the report underlined.
