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Issuance of prepaid instruments to come under BB guidelines

REZAUL KARIM | June 05, 2023 00:00:00

Issuing various prepaid instruments, such as cash vouchers, gift cards, cash cards, reward cards and wallets, by non-payment system entities is going to come under a legal framework that includes a provision prohibiting the purchase and conversion of illegal online gambling, betting, virtual currency, diamonds, coins etc.

The central bank is set to issue guidelines to bring discipline to such prepaid transactions by private enterprises, including e-commerce companies, shopping centres and malls, who mainly use the prepaid payment instruments as a marketing tool.

But according to central bank officials, the instruments sometimes offer unrealistic discounts or cash rewards that do not align with reality.

Referring to the Digital Commerce Operation Guidelines 2021 by the commerce ministry, a senior Bangladesh Bank official said the issuance, use, sale and purchase of such items without prior approval from the central bank are prohibited.

But different e-commerce firms, shopping centres, malls and others often violate the commerce ministry policy by offering various types of gift cards, gift vouchers, wallets and cash vouchers, at discounts ranging from 25 per cent to 70 per cent, said the official.

He mentioned that such offers are more frequent, especially during various festivals.

He said the draft guidelines of the central bank have strict provisions for issuing different prepaid products by various non-payment system entities.

Under the draft "Guidelines for issuing Prepaid Instruments (PI) by non-payment entities-2023", non-payment system private agencies will be able to issue two types of pre-paid instruments: closed pre-paid instruments (CPI) and semi-closed pre-paid instruments (SCPI).

On the other hand, open prepaid instruments (OPI) can only be issued by banks, mobile financial services (MFS), and payment service providers (PSP) who are authorised to issue them.

However, the issuance of OPI by banks and the MFS will not fall under the purview of the guidelines.

According to the draft rule, the issued cards, namely CPI and SCPI, can only be used for purchasing goods and services from the issuers. The issuers have the option to issue these two instruments in either physical or digital forms. However, both instruments are non-reloadable.

The guidelines have imposed restrictions on the conversion of the card values to any other virtual currency or purchasing currency, such as virtual diamonds, gold, MR points, coins, gems, etc.

The prepaid cards cannot be converted into Bangladeshi Taka (BDT) through any means, including cash-out, bank transfer and ATM withdrawal.

Both instruments - CPI and SCPI - are prohibited from being used for the purchase or subscription of illegal content, including online gambling, betting, gaming, etc. These cards are intended for local use only and cannot be used globally.

The BB has already sent the draft guidelines to the commerce ministry, seeking their opinion on the subject.

Issuer organisations are not permitted to offer more than a 30 per cent discount on the face value of the instruments, according to the guidelines.

The face value of both PIs will be the value indicated on the PIs in Bangladeshi Taka (BDT), which the buyer will be entitled to use for purchases using the instruments.

The aggregate outstanding value of CPI and SCPI issued by an issuer will be limited to a maximum of 20 per cent of its net worth in the immediate previous fiscal year or Tk 250 million, whichever is lower.

Merchants concerned can issue closed prepaid instruments in accordance with the guidelines and the validity of these instruments will be for a one-year life cycle from July to June.

Issuer-eligible entities will need to submit their issuing plan for CPI in June of each year. However, no approval from BB is required for issuing CPI.

On the other hand, entities intending to issue SCPI in the next July-June cycle need to apply to the central bank in April of each year and obtain yearly approval.

According to the guidelines, the bearer or person holding the instrument must make payments for goods and services from a group of sellers registered by the relevant issuer.

For the issuance of CPI, the entities must have a minimum paid-up capital of Tk 200 million, while for SCPI, the requirement is Tk 50 million. They must demonstrate their business activity and provide audited financial statements for the past five years.

Besides, the issuer agencies must be registered under the Companies Act, 1994, or the Societies Registration Act, 1860.

The issuance of these guidelines is an exercise of the powers conferred under clause 7 A (e) of the "Bangladesh Bank Order 1972" and the "Digital Commerce Porichalona Nirdeshika 2021".

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