In a move that may lead to an increase in foreign investment in prepaid payments services, India has announced that businesses which operate Stored Value cards, Smart Cards and Value Added Cards, Charge Cards, Debit Cards etc (payment mechanisms, all) can raise up to 100% foreign direct investment. What’s more these businesses are allowed to raise money under the automatic route, without having to go the Foreign Investment Promotion Board. Some minimum capitalization norms, though:

(i) US $0.5 million for foreign capital up to 51% to be brought upfront
(ii) US $ 5 million for foreign capital more than 51% and up to 75% to be brought upfront
(iii)US $ 50 million for foreign capital more than 75% out of which US$ 7.5 million to be brought upfront and the balance in 24 months.
(iv)100% foreign owned NBFCs with a minimum capitalisation of US$ 50 million can set up step down subsidiaries for specific NBFC activities, without any restriction on the number of operating subsidiaries and without bringing in additional capital. The minimum capitalization condition as mandated by para 3.10.4.1, therefore, shall not apply to downstream subsidiaries.
(v) Joint Venture operating NBFCs that have 75% or less than 75% foreign investment can also set up subsidiaries for undertaking other NBFC activities, subject to the subsidiaries also complying with the
applicable minimum capitalisation norm mentioned in (i), (ii) and (iii)
above and (vi) below.
(vi)Non- Fund based activities : US $0.5 million to be brought upfront for all permitted non-fund based NBFCs irrespective of the level of foreign investment subject to the following condition:
It would not be permissible for such a company to set up any subsidiary for any other activity, nor it can participate in any equity of an NBFC holding/operating company.

This will be subject to compliance with the guidelines of Reserve Bank of India.

There are currently 20 companies with prepaid licenses in India, but in the past some companies, like TimesOfMoney, have returned their license, and others, like Kaizen, had their license revoked. The transaction limit on these prepaid cards was increased to Rs 50,000 last year.

Prepaid Payment licensees:

 

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