Note4Students
From UPSC perspective, the following things are important :
Prelims level: Prepaid Payment Instrument (PPI), DICGC
Mains level: Not Much
Central Idea
- Recommendation for DICGC cover extension: A committee suggests extending Deposit Insurance and Credit Guarantee Corporation (DICGC) cover to Prepaid Payment Instrument (PPI) holders to protect against fraud and unauthorized transactions.
- Relief for PPI holders: Acceptance of the recommendation would provide significant relief to PPI holders.
Understanding Prepaid Payment Instrument (PPI)
- Definition: PPIs are instruments facilitating various financial transactions and the purchase of goods and services.
- Types: PPIs can be categorized as small PPIs and full-KYC PPIs, issued as cards or wallets.
- Loading/reloading options: PPIs can be loaded/reloaded with cash, debit/credit cards, or bank transfers.
Issuers of PPI Instruments
- Authorized issuers: Banks and non-banks authorized by the RBI can issue PPIs.
- Examples of authorized issuers: Airtel Payments Bank, Axis Bank, Union Bank, and others are permitted to issue and operate PPIs.
- Non-bank PPI issuers: Amazon Pay (India), Bajaj Finance, Ola Financial Services, and others also offer PPI services.
RBI Committee’s Recommendations
- Call for DICGC cover examination: The committee recommends examining the extension of DICGC cover to bank and non-bank PPIs.
- Purpose of examination: Considering PPIs as deposits held with regulated PPI issuers requires further examination.
Understanding DICGC
- Role of DICGC: DICGC, a subsidiary of the RBI, provides deposit insurance.
- Protection for depositors: DICGC ensures the stability of the financial system by protecting small depositors in the event of a bank failure.
- Coverage scope: DICGC covers commercial banks, payments banks, small finance banks, regional rural banks, and cooperative banks licensed by the RBI.
DICGC Coverage and Limits
- Types of deposits covered: DICGC insures savings, fixed, current, recurring, and accrued interest deposits.
- Maximum insurance limit: Each depositor is insured up to a maximum of Rs 5 lakh for both principal and interest amounts.
- Increase in insurance cover: The insurance cover was raised to Rs 5 lakh in 2020 from the previous limit of Rs 1 lakh.
Total Number of PPIs
- PPI quantity as of March 31, 2023: The system comprised 16,185.26 lakh PPIs, including 13,384.68 lakh wallets and 2,800.58 lakh cards.
- Transaction volume in FY2023: The total volume transacted through PPIs in FY2023 reached 74,667.44 lakh.
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