Prepaid transit instruments: Step to a ‘less-cash society’

Following up on the government’s initiative to encourage Indians to move to electronic payment methods, the Reserve Bank of India (RBI) has issued guidelines on the use of “prepaid payment instruments” (PPIs). A PPI facilitates the purchase of goods and services against value stored on it.

The rationale for encouraging electronic payment methods is that the Indian economy is overwhelmingly based on cash transactions and this has been recognized to cause revenue leakage. Further, the import of paper and technologies to print new currency notes (and destroy old ones) substantially adds to the exchequer’s bill.

With this in mind, the government is strongly promoting a “less-cash society”, where electronic payment methods predominate. Further, the finance minister in this year’s budget speech noted that cash transactions had to be discouraged to curb black money, and proposed to introduce measures that “will incentivize credit or debit card transactions, and disincentivize cash transactions”.

Phoenix Legal is a full-service law firm with offices in New Delhi, Mumbai and Chennai. Sawant Singh is a partner and Aditya Bhargava is a principal associate in the Mumbai office.