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Mobile Wallet License in India
The concept of mobile wallets in India was introduced in 2009-2010 to replace cash-based transactions. It was initially launched to do prepaid recharges and bill payments. However, it has evolved into a crucial yet sophisticated digital payment gateway, accounting for 85% of all digital transactions in India. Whether for paying utility bills, booking tickets, or transferring funds, mobile wallets have emerged as a convenient alternative to cash. Popular platforms like MobiKwik, Paytm, and Airtel Money have reached the doorsteps of Indian households, making digital transactions a part of everyday life. Mobile wallet services require a proper regulatory license issued by the Reserve Bank of India (RBI) under the Payment and Settlement Systems Act, 2007.
What is a Mobile Wallet?
A mobile wallet, also known as a Prepaid Payment Instrument (PPI), enables users to store money digitally and make payments online. Instead of carrying cash or physical cards, you can use your mobile wallet to:
- Pay for things in stores by tapping your phone (using NFC).
- Send or receive money from others.
- Store card details, like debit/credit cards, loyalty cards, or even tickets.
Example: Apple Pay, Google Pay, and Samsung Wallet
Legal Framework
Mobile wallet operations in India are governed by the following statutes and rules:
- Payment and Settlement Systems Act, 2007: The statute authorises the RBI to regulate and supervise payment systems in India. It empowers RBI to grant or revoke licenses, issue operational conditions, and penalise violations related to prepaid payment instruments.
- Master Directions on Prepaid Payment Instruments (PPIs): It was issued in August 2021 to consolidate all the operational rules applicable to PPIs. It defines wallet categories, licensing criteria, KYC requirements, transaction limits, interoperability mandates, grievance mechanisms, and customer protection standards.
- Know Your Customer (KYC) Directions, 2016: It defines the customer identification procedures, risk categorisation, periodic updating requirements, and documentation obligations for onboarding.
- RBI Guidelines on Cybersecurity for Payment Systems (2022): It prescribes the minimum cybersecurity standards, periodic audits, encryption protocols, tokenisation, access controls, and data breach.
- Prevention of Money Laundering Act, 2002 (PMLA): Mobile wallet operators in India fall under the definition of 'reporting entities' and are required to maintain records of transactions, report suspicious activity to the FIU-IND, and adopt anti-money laundering (AML) and counter-terrorism financing (CFT) policies
- Information Technology Act, 2000: It provides the responsibilities of wallet service providers for data protection, handling personal information securely and provides the penalty for unauthorised disclosures of information or breaches.
- Foreign Exchange Management Act (FEMA): This is applicable in cases of foreign investment in the wallet or when there is cross-border remittance and e-commerce.
Types of Mobile Wallets in India
There are three types of mobile wallets in India
1. Open System PPIs (Open Wallets)
These wallets are used for purchases, fund transfers, and cash withdrawals at ATMs, point of sale terminals, or through banking channels. Only authorised banks are permitted to issue open system PPIs.
RBI Status: Only scheduled commercial banks (and permitted NBFC-bank partnerships) are allowed to issue open wallets. These are subject to full-KYC compliance, mandatory interoperability, escrow maintenance, and periodic audits.
Example: HDFC PayZapp, ICICI Pockets Wallet, Airtel Payments Bank Wallet
2. Semi-Closed System PPIs (Semi-Closed Wallets)
These wallets allow users to purchase goods and services, including financial services, at identified merchant locations or establishments that have a contract with the issuer to accept the instrument. Cash withdrawal is not permitted under this license.
RBI Status: RBI authorisation is mandatory. Issuers must comply with capital adequacy norms, KYC regulations, transaction limits, interoperability (post full-KYC), and periodic reporting.
Example: Paytm Wallet (non-bank), Freecharge Wallet, PhonePe Wallet (when not using UPI rails).
3. Closed System PPIs (Closed Wallets)
These wallets are issued by an entity to facilitate the purchase of goods and services exclusively from that entity. They do not allow cash withdrawal or redemption.
RBI Status: No RBI authorisation is required since these instruments are not classified as payment systems.
Example: Amazon Pay (used for transactions only on Amazon), Ola Money (usable solely for Ola rides or affiliated services).
Eligibility Criteria for Wallet License
To apply for a semi-closed or open wallet license, the applicant must:
- The applicant must be a company incorporated in India under the Companies Act, 2013. Partnerships, LLPs, or unincorporated bodies are not eligible to apply for a mobile wallet license.
- The company must have a minimum net worth of ₹15 crore at the time of application. It must be increased to ₹25 crore within three years of the commencement of operations.
- The entity must possess secure and scalable digital infrastructure for wallet operations, along with encryption, tokenisation, and cybersecurity measures in line with RBI’s cybersecurity guidelines.
- Non-bank PPI issuers must maintain an escrow account with a scheduled commercial bank.
- The applicant must appoint a statutory auditor and an internal auditor and provide for annual system audits, reconciliation procedures, and data integrity validations.
- A detailed 5-year business plan must be submitted outlining market strategy, expected transaction volumes, risk controls, fund flow mechanisms, and merchant onboarding strategy.
Documents Needed to Apply for Mobile Wallet Licence
- Certificate of Incorporation of the Company
- Memorandum and Articles of Association (MoA and AoA) of the Company
- Net worth certificate of the Company
- Board Resolution to authorise the filing of the application
- Detailed Business Plan
- Escrow Bank Confirmation Letter
- Organisational structure of the Company
- CVs or profiles of key managerial personnel.
- List of Group Companies/Subsidiaries
- List of proposed partner merchants
- Statutory Auditor Certificate
- Technology System Architecture
- User Agreement and Privacy Policy
KYC Requirements
As per RBI’s Master Directions and the KYC Directions, 2016, all wallet issuers need to secure KYC procedures:
1. Minimum KYC wallets
- Basic details like mobile number, name, and one officially valid document (OVD) (e.g., Aadhaar, PAN, Voter ID)
- Max balance: ₹10,000; Reload limit: ₹10,000/month
- No cash withdrawals or fund transfers
- Valid for 24 months only unless upgraded to full KYC
2. Full KYC Wallets
- Full KYC is required for long-term use
- Must collect and verify PAN + Aadhaar or other OVDs
- Max balance: ₹2,00,000
- Permits all transactions: merchant payments, P2P transfers, cash withdrawal (only for Open Wallets), and interoperability
3. Video-Based Customer Identification Process (V-CIP)
Wallet providers can onboard customers using real-time video KYC
4. Periodic KYC Review
- Customer details must be periodically updated depending on risk categorisation (low, medium, high risk)
- Full re-KYC is required every 2-8 years, depending on risk level
5. Suspicious transaction reporting
Wallet operators must flag and report transactions suspected of money laundering to FIU-IND
6. KYC for erchants
- PAN, GSTIN, bank proof, and address verification are required
- Ensure entity legitimacy before onboarding as a merchant partner
7. Record-keeping obligations
All KYC and transactional data must be retained for a minimum of 10 years after account closure
Procedure for Obtaining a Mobile Wallet License
Step 1: Prepare Documents
Collect all the documents, business plans, compliance policies, IT and audit protocols, and escrow agreement.
Step 2: Register on RBI’s COSMOS Portal
Create an account under the Centralised Online Submission Module, upload scanned documents, and register the company profile.
Step 3: Submit the Application Form A
Apply under Regulation 3 of the Payment and Settlement Systems Regulations, 2008 and upload the Form A, business plan, KYC/AML policy, and other prescribed documents.
Step 4: Initial Scrutiny by RBI
RBI will evaluate the net worth, promoter background, cybersecurity readiness, escrow structure, and risk framework. RBI may seek clarifications and ask for additional inputs.
Step 5: Approval
If the RBI is satisfied with your application, it will grant an in-principle approval - valid for six months. During this period, the applicant must complete all compliance obligations, hire staff for the entity, establish infrastructure, and show that they are ready to start the operations.
Step 6: Final Authorisation
Upon meeting the in-principal conditions, RBI issues final authorisation to commence wallet operations. The entity is now permitted to issue and manage PPIs.
Validity period of prepaid payment wallet license
As per the RBI’s Master Directions on PPIs (February 2023), the authorisation granted to a mobile wallet issuer remains valid for a period of five years from the date of issue. The validity of the license is subject to the following conditions:
- The licensee complies with the RBI's regulations and directions.
- Any major change in business model, control, or ownership must be reported to the RBI in advance.
- Licensees are required to apply for renewal at least three months prior to the expiry of the current license.
Things to keep in mind
- Choose the wallet classification early
- Design an escrow model that ensures daily settlements
- Implement RBI-compliant cybersecurity protocols
- Set up independent internal and system audits
- Incorporate AML and CFT mechanisms by design
- Integrate interoperability architecture
- Review all outsourced technology vendors
- Digitise KYC expiry alerts and enforce restrictions
- Submit renewal application on time
- Disclose control/ownership changes in advance
Why Choose Kanakkupillai?
At Kanakkupillai, we don’t just provide a service - we are your partner in obtaining your mobile wallet license. We provide:
- Regulatory assessment for your business: Our team of experts conduct a detailed compliance audit and gap analysis to ensure your business structure, documentation, and internal systems are aligned with RBI’s regulations before applying for the license.
- Customised entity setup: For the applicants whose company is not yet incorporated, we help set up the company with a capital structure, shareholding pattern, and board composition that aligns with PPI norms and investor-readiness.
- Complete RBI application handling: We prepare and file your Form A, escrow model, cybersecurity policy, business plan, and all supporting documentation on the COSMOS portal.
- End-to-End audit & policy support: We draft and review your policies for AML, fraud detection, dispute redressal, and cyber hygiene. Our audit teams conduct mock inspections to prepare for RBI’s scrutiny.
- Post-approval compliance suite: Once licensed, we manage RBI filings, transaction reporting, STR submissions, board declarations, and renewal applications as your extended compliance arm.
- Transparent fee & milestone-based engagement: We operate on fixed quotes and clear timelines, with no hidden charges.
Frequently Asked Questions
Is RBI authorisation mandatory for all types of mobile wallets?
No, the closed wallets do not require RBI approval. However, semi-closed and open wallets must obtain prior authorisation from the Reserve Bank of India under the Payment and Settlement Systems Act, 2007.Can an individual or a partnership firm apply for a wallet license?
No. Only a company incorporated under the Companies Act, 2013, is eligible to apply for a mobile wallet license in India. LLPs, HUFs, and sole proprietors are not eligible.What is the minimum capital requirement for a wallet license?
The company must have a minimum net worth of ₹15 crore at the time of application and increase it to ₹25 crore within three years from the commencement of operations.What are the limitations of a minimum KYC wallet?
Minimum KYC wallets are capped at ₹10,000 in balance and monthly load, and cannot be used for fund transfers or cash withdrawals. They are valid for 24 months unless upgraded.Are foreign investors allowed to invest in wallet companies?
Yes. Foreign investment is permitted in accordance with FDI Policy and FEMA Regulations. Prior RBI or government approval may be necessary in certain cases.What is an escrow account, and who maintains it?
It is a dedicated account held with a scheduled commercial bank for safeguarding wallet funds. The non-bank PPI issuer must enter into an escrow agreement with a bank.Can mobile wallets be integrated with UPI or card networks?
Yes. Full-KYC wallets must be interoperable and must integrate with authorised payment systems like UPI, RuPay, and other card schemes as directed by RBI.What is the validity period of a wallet license?
Five years from the date of authorisation. The entity must apply for renewal at least three months before expiry, or risk cancellation.Can non-banking entities issue open wallets?
No. Only scheduled commercial banks or permitted bank-NBFC partnerships are eligible to issue open wallets. Non-bank entities are allowed to issue only semi-closed wallets.Is Video KYC (V-CIP) permitted for onboarding users?
Yes. Wallet providers can use Video Customer Identification Process (V-CIP) in compliance with RBI’s KYC Directions to onboard users digitally.Can wallet operations continue if the renewal application is pending?
Only if the renewal application is filed before expiry, if not renewed on time, the wallet provider must cease operations immediately upon license expiry.What obligations apply in case of change in control or ownership?
Any change in shareholding, management, or control must be reported to the RBI in advance. Failure to report may result in suspension or cancellation of the license.What makes Us Different
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