To facilitate purchase of goods and services, including financial services, by its 12 million customers, Bajaj Finance has applied for a Pre-paid Payment Instrument (PPI) licence.

The non-banking finance company, which is into consumer, SME, commercial and rural lending, has sought the RBI’s approval for a PPI licence under the ‘semi-closed system payment instrument’ category, according to MD Rajeev Jain.

Semi-closed loop PPIs can be used at merchant locations/establishments that have a specific contract with the issuer to accept the instruments. These instruments do not permit cash withdrawal or redemption by the holder.

Jain observed that PPI works well only for those who have a customer franchise. The standalone PPI business model is very tough.

Depending on the level of customer due diligence, semi-closed PPIs can be issued up to a value not exceeding ₹1 lakh. All pre-paid payment instruments issued in the country shall have a minimum validity period of six months from the date of activation/issuance to the holder.

Jain also said a B2B partnership with a like-minded payment bank or a small (finance) bank could be mutually profitable.

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