In a major decision, the Reserve Bank on Friday said it will soon facilitate cash deposit facility in banks through use of the popular UPI, an instant real-time payment system for inter-bank transactions through mobile phones.

The central bank also decided to permit linking of Prepaid Payment Instruments (PPIs) through third-party Unified Payments Interface (UPI) applications.

Announcing the first bi-monthly monetary policy of the current financial year, RBI Governor Shaktikanta Das said that cash deposit machines (CDMs) deployed by banks enhance customer convenience while reducing cash-handling load on bank branches.

The facility of cash deposit is presently available only through use of debit cards.

"Given the popularity and acceptance of UPI, as also the benefits seen from the availability of UPI for card-less cash withdrawal at ATMs, it is now proposed to facilitate cash deposit facility through use of UPI," Das said.

Operational instructions will be issued shortly, the RBI said.

The RBI has also proposed to permit linking of PPIs through third-party UPI applications to provide more flexibility to users.

At present, UPI payments from bank accounts can be made by linking a bank account through the UPI app of the bank or using any third-party UPI application. However, the same facility is not available for PPIs.

PPIs can currently be used to make UPI transactions only by using the application provided by the PPI issuer.

"To provide more flexibility to PPI holders, it is now proposed to permit linking of PPIs through third-party UPI applications. This will enable the PPI holders to make UPI payments like bank account holders," the RBI said.

Instructions in this regard too will be issued shortly.