Cross Border Transactions and PPIs
PPI (Prepaid Payment Instrument) is permitted to be used for cross border transactions for permissible current account transactions. A Cross Border Transaction or International Transaction is a transaction relating to international trade between two or more entities beyond the boundaries of a country. It can also be a transaction of domestic trade, if at least one of the parties is located outside the country of the transaction. PPI, which is basically a payment card, has evolved as an integral component of digital banking.
Cross border transactions (outward), PPI and transaction limits
Semi-closed and open system reloadable PPIs are permitted to be used for cross border outward transactions subject to certain conditions:
1. The card holder shall be KYC compliant. KYC compliance is a process adopted by banks and financial institutions for establishing the identity of a customer by obtaining required identification documents.
2. PPIs shall be issued by Authorised Dealer Category-I banks
3. Cross-border outward transactions shall be for permissible current account transactions under FEMA viz for purchase of goods and services.
4. Cross-border outward transactions facility shall be enabled only on explicit request of the Prepaid Payment Instrument holder.
5. Transactions shall be subject to the below mentioned conditions
a. Transaction Limits :
Per transaction limit- Max Rs. 10,000/-.
Per month limit- Max Rs. 50,000/-.
b. Transactions allowed :
Only for those current account transactions permitted under Foreign Exchange Management Act (FEMA) viz. purchase of goods and services. All other norms relating to transaction shall be strictly adhered to.
c. . Transactions not-allowed :
i. Any cross-border outward fund transfer and / or remittances under the Liberalise Remittances Scheme (LRS).
ii. Prefunding of online merchant’s account.
Cross border transactions (inward), PPIs and transaction limits
Banks and non-bank PPI issuers, who are Indian agents of the authorised Overseas Principal (OP), are permitted to issue
i. KYC compliant PPIs
ii. to beneficiaries of cross border inward remittance under the Money Transfer Service Scheme (MTSS) of the RBI
iii. Amounts up to 50,000/- from individual inward MTSS remittances only are permitted to be loaded or reloaded in PPIs for facilitating cross border inward transactions, issued to beneficiaries. If a single transaction amount is in excess of 50,000/-, the full amount shall be paid by credit to a bank account.
The conditions indicate that the entity undertaking issuance of PPIs for cross-border inward transactions shall be
i. an authorised PPI issuer and
ii. an Indian Agent under MTSS (Entities under Money Transfer Service Scheme (MTSS) are authorised by Foreign Exchange Department, RBI)
iii. the issuer shall not resort to splitting of transaction while loading funds in PPIs. For example, if the amount is Rs. 80,000, entire amount shall be credited to bank account rather than crediting Rs. 50,000 to PPI and balance to account.
