Banking Sector Reforms

Deposit Insurance Cover for PPIs


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.

Get an IAS/IPS ranker as your 1: 1 personal mentor for UPSC 2024

Attend Now

Notify of
Inline Feedbacks
View all comments


Join us across Social Media platforms.

💥Mentorship New Batch Launch
💥Mentorship New Batch Launch