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, according to a report released on Friday, 12 June. The findings come as industry stakeholders weigh the implications of the Reserve Bank of India's (RBI) recently issued draft directions on PPIs.

Key Findings of the Report

The report, published by Pahle India Foundation, called for a proportionate, risk-based regulatory approach that aligns compliance requirements with actual risk levels. It specifically urged policymakers to preserve low-value, high-frequency use cases — the backbone of India's everyday digital transactions. The foundation also recommended that major policy interventions be preceded by regulatory impact assessments and phased implementation to allow market participants adequate time to adapt.

How Big the PPI Ecosystem Has Grown

Drawing on over six years of RBI payment system data, the report highlighted that PPI volumes reached 98,699 lakh transactions in FY 2025-26, cementing their role as a significant pillar of India's digital payments infrastructure. PPIs now facilitate billions of transactions annually across consumer payments, merchant transactions, e-commerce platforms, gig economy services, and financial inclusion use cases.

Their accessibility has made them particularly relevant for gig workers, small merchants, and financially underserved populations. This reach is reflected in the RBI's Digital Payments Index (DPI), which surged from 217.74 in September 2020 to 516.76 in September 2025 — a 137 per cent increase across eleven consecutive periods of uninterrupted growth.

What Experts Said

'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.

The report noted that PPIs serve as an entry point into the digital economy for first-time users, providing low-friction payment solutions that complement India's broader digital public infrastructure. A balanced regulatory approach, it argued, can preserve the gains PPIs have delivered while addressing emerging challenges in a rapidly expanding ecosystem.

The Regulatory Context

The report arrives amid active industry discussions around the RBI's draft directions on PPIs and their potential impact on consumers, merchants, fintech firms, and the wider digital payments ecosystem. Critics argue that overly prescriptive rules risk raising compliance costs for smaller players — precisely those serving underserved segments — and could slow the pace of adoption that has defined the past five years.

What Happens Next

The Pahle India Foundation's recommendations are likely to feed into stakeholder consultations as the RBI finalises its PPI directions. The outcome will have direct implications for fintech firms, wallet providers, and the millions of Indians who rely on PPIs for daily transactions. How the regulator balances consumer protection with ecosystem growth will define the next chapter of India's digital payments story.