Proposed changes to India’s prepaid payment instrument (PPI) framework could have unintended consequences for digital payments adoption, financial inclusion and everyday consumer transactions if not carefully calibrated
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NEW DELHI — Proposed changes to India’s prepaid payment instrument (PPI) framework could have unintended consequences for digital payments adoption, financial inclusion and everyday consumer transactions if not carefully calibrated, a report said on Friday.
The report from Pahle India Foundation called for a proportionate, risk‑based approach that aligns compliance requirements with actual risk levels and urged preserving low‑value, high‑frequency use cases.
Major policy interventions should be preceded by regulatory impact assessments and phased implementation to allow market participants to adapt.
The report comes amid industry discussions around the Reserve Bank of India's recently issued draft directions on PPIs and their impact on consumers, merchants, fintech firms and the broader digital payments ecosystem.
Drawing on over six years of RBI payment system data, the report said Prepaid Payment Instruments (PPI) volumes reached 98,699 lakhs in FY 2025-26, evolving into a significant component of India's digital payments infrastructure.
It facilitated billions of transactions annually across consumer payments, merchant transactions, e-commerce platforms, gig economy services, and financial inclusion use cases, the report noted.
Prepaid payment instruments serve as an entry point into the digital economy for first-time users and provide low-friction payment solutions that complement India's broader digital public infrastructure.
Their accessibility has made them particularly relevant for gig workers, small merchants, and financially underserved populations, causing RBI’s Digital payment Index (DPI) surge from 217.74 in September 2020 to 516.76 in September 2025 – a 137 per cent increase across eleven consecutive periods of uninterrupted growth.
"As policymakers seek to strengthen consumer protection and operational resilience, it is important that regulatory interventions remain proportionate, evidence-based and supportive of continued adoption," said Dr. Suyog Dandekar, Senior Economist at Pahle India Foundation.
A balanced regulatory approach can help preserve the benefits PPIs have delivered while addressing the emerging challenges posed by a rapidly expanding digital payments ecosystem, the report noted.