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In a step to offer greater convenience to UPI users, the Reserve Bank of India (RBI) declared that it has permitted Unified Payments Interface (UPI) transactions for fully KYC-compliant Prepaid Payment Instruments (PPIs) via third-party UPI apps. So far, the bank's UPI application or any third-party application provider can be utilized to carry out UPI transactions to or from a bank account. Nonetheless, UPI transactions to/from a PPI can solely be performed through the mobile app offered by the PPI provider. RBI is ready to modify this rule. As per the change, now wallet users won't have to rely on the PPI wallet issuer for UPI payments; instead, they can utilize third-party apps to conduct transactions through the wallet via UPI. PPI issuers need to link their customers’ UPI handles with their PPIs so that only the owners of their full-KYC PPIs can conduct UPI transactions. The application's issuer will utilize the customer's existing PPI credentials to verify UPI transactions from PPI. Consequently, a transaction of this nature will be authorized beforehand before entering the UPI system. RBI stated in a notification dated December 27, 2024, “A PPI issuer shall enable holders of only its full-KYC PPIs to make UPI payments by linking its customer PPIs to its UPI handle. UPI transactions from PPI on the issuer’s application shall be authenticated using the customer’s existing PPI credentials. Such a transaction will, thus, be pre-approved before it reaches the UPI system. “It further added, “A PPI issuer, in its capacity as a PSP, shall not on-board customers of any bank or any other PPI issuer. A PPI issuer may also facilitate discovery of its full-KYC PPIs on third-party UPI mobile applications, who, in turn shall enable such PPIs to be linked to their PSP handle/s. Such UPI transactions, from PPIs using third party UPI applications, shall be authenticated using the UPI credentials.”As per the new change, bank experts say that PPI wallets will become interoperable. Vivek Iyer, Partner at Grant Thornton Bhara told the Economic Times, “UPI access for PPI is a great step towards interoperability across the payment ecosystem. RBIs mindset seems to be of broad basing UPI across the ecosystem in order to foster competition amongst other products and help fuel further innovation.”Prepaid Payment Instruments (PPIs) are financial tools that allow individuals to buy products and services, move money, or obtain financial services using preloaded stored value. They serve as a substitute for cash or credit/debit cards and can be frequently utilized for the sake of convenience and safety in financial dealings.