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RBI Makes Useless Prepaid Card Rules for Metro Transit Systems, What Were They Thinking?


The RBI has new “Guidelines for Prepaid Instruments for Mass Transit System“. This is like telling people now, in 2015, that you are allowed to wear a seat belt inside a car. (Meaning: we’re doing it already!) Mass transit systems like the Mumbai railways, the Delhi Metro or even the tiny little Bangalore Metro have had prepaid cards or tickets for a very very long time. Bangalore’s bus system thrives on multiple layers of prepaid tickets (monthly, weekly, daily!). Season passes for many commute types have been available forever, so why these rules?

Because RBI says the word “semi closed”.

The Mass Transit system (like Railways) can have other merchants on their platforms, where you could potentially use the card to make payments. I presume this is for purchasing food or water from the platform vendors, for instance. Here’s the rules:

  1. The semi-closed PPIs will be issued by the mass transit system operator (PPI-MTS) after authorisation under the Payment and Settlement Systems Act, 2007 to issue and operate such semi-closed PPIs;

  2. The PPI-MTS will necessarily contain the Automated Fare Collection application related to the transit service to qualify as PPI-MTS;

  3. 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 ;

  4. 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;

  5. The PPI-MTS will have minimum validity of six months from the date of issue;

  6. The issuer may decide upon the desired level of KYC, if any, for such PPIs;

  7. The PPI-MTS issued may be reloadable in nature and at no point of time the value / balance in PPI can exceed the limit of Rs. 2,000/- (Rupees Two Thousand Only);

  8. No cash-out or refund will be permitted from these PPIs;

  9. Funds transfer under the Domestic Money Transfer (DMT) guidelines will also not be applicable to these PPIs;

  10. 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.

In general: You can buy, you can use it on other merchants on the same premises (which probably applies to a metro, mostly, and not to other forms of mass transit like buses, where there are usually no “premises”) and you can’t take money out of it. Also you are limited to Rs. 2000 per card as a balance.

A prepaid instrument however, can be purely electronic. So technically, you could even use an app on your phone to hold your transit cards, rather than carry little cards everywhere.

This is a waste of time, for the only added benefit of being able to buy stuff with the same card with merchants. What’s the point, really, one wonders. And then, the big flaw:

You Can’t Link Transit Systems!

The wording is such that you can’t have a single ticket across multiple transit systems. In many European countries you can buy a day pass and use ANY mass transit system – the Metro, the buses, trams or anything else.

With the card restricted to one “MTS”, no Indian city will be able to offer cards across mass transit systems: you’ll have to use a paper ticket (so cash) for it, or simply buy new tickets everywhere.

Another goal would be, say, to encourage tourism in a city and have a single card that could be used in any tourist location for the entry fee. That way you don’t have to stand in a queue everywhere. But, according to these rules, no. 

Finally, this is useless because it’s not majorly different from the current “prepaid card” systems that the metros have anyhow unless RBI wants to FORCE such entities to park such prepaid balances at a bank account in escrow etc. Which would be stupid, because these are government owned entities we probably trust even more than banks.

Rules are important but we need to think a little deeper into what our rules will restrict us from doing, rather than just introducing them just as they are. I would have a different view if the RBI had thought of the above and decided that no, such applications are not required. (And I would think they have lost their mind – our collective outrage would push change). However, it appears like they haven’t even thought through applications.

I would be more enthused if RBI were quick to change rules according to changing technologies and demand, especially if these have been deemed quite useful in other countries.


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