UPI (Unified Payment Interface)

Context:  NPCI has set out guidelines for UPI transactions stating that a person can initiate a maximum payment of ₹1 lakh per day through UPI. Key Points:
  • Need for daily limits:
    • To sustain the smoother functioning of the payments interface as it continues to acquire popularity.
    • The limits are set balancing out customer convenience and potential fraud/risk concerns.
  • Present daily limits: At present, users can make up to 20 transactions or ₹1 lakh in a single day — either all at once or through the day.
About Unified Payments Interface (UPI):
  • Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single mobile application of any participating bank.
    • It was launched by the NPCI in 2016 in conjunction with the Reserve Bank of India (RBI) and the Indian Banks Association (IBA).
  • Participants in UPI: Payer Payment Service Provider (PSP), Payee PSP, Remitter Bank, Beneficiary Bank, NPCI, Bank Account holders, and Merchants.
  • Performance of UPI:
    • In May this year, the total number of transactions facilitated using UPI increased to 9,415.19 million. 
    • The combined value of such transactions also increased at a largely similar ₹14.89 lakh crore.
    • UPI payments saw a record high of ₹149.5 trillion UPI, card transactions in 2022, as per Worldline report.
Benefits of UPI:

Table of Contents



  • Single click Two Factor authentication
  • Universal Application for transaction
  • Leveraging existing infrastructure
  • Safer, Secured and Innovative
  • Payment basis Single/ Unique Identifier
  • Enable seamless merchant transactions
  • Seamless fund collection from customers – single identifiers
  • No risk of storing customer’s virtual address like in Cards
  • Tap customers not having credit/debit cards
  • Suitable for e-Com & m-Com transaction
  • Single click 2FA facility to the customer – seamless Pull
  • In-App Payments (IAP)
  • Round the clock availability
  • Single Application for accessing different bank accounts
  • Use of Virtual ID is more secure, no credential sharing
  • Single click authentication
  • Raise Complaint from Mobile App directly
 Challenges in Scaling-Up UPI:
  • Sustainability and Funding:
    • Concerns over sustaining UPI in the long run without a Merchant Discount Rate (MDR) to fund its infrastructure.
    • Currently, neither customers nor merchants pay any additional charges.
  • Continued Use of Cash:
    • Cash transactions still hold significance despite the decrease in cash usage since the introduction of UPI.
    • People’s preference for cash is driven by fears of tax issues and its wide acceptance as a payment method.
  • Limited Internet and Smartphone Penetration:
    • Not all individuals have access to the internet and smartphones, making UPI transactions challenging for a significant portion of the population.
  • Lack of Digital Literacy:
    • Insufficient digital literacy among the masses hinders their ability to effectively use the UPI system.
    • The predominant use of English language in UPI apps limits adoption among non-English speakers.
  • Cybercrimes: Amid the coronavirus pandemic, the global banking and financial services industry faces an escalated risk of cybercrime.
    • Until February in the financial year 2022­-23, the total number of reported UPI frauds had also increased about 13% in comparison to the previous financial year to 95,402.
  • Emerging challenges include fraudulent claims, chargebacks, the creation of fake buyer accounts, abuse of promotions and coupons, account takeover, identity theft, theft of card details, and the occurrence of triangulation frauds.
Way Forward:
  • Expanding UPI’s Reach:
    • Accelerate efforts to extend the impact of UPI beyond metropolitan areas and focus on rural areas for its widespread adoption.
  • Leveraging Cost Savings:
    • Utilize the cost savings achieved by banks through reduced hassles and overheads to support the long-term operation of UPI.
  • Infrastructure and Digital Literacy Initiatives:
    • Implement initiatives like the Bharat Net project to enhance internet connectivity across the country.
    • Strengthen programs like PMG Disha to improve digital literacy among the population, enabling them to use UPI effectively.
  • Sharing Technology with Other Countries:
    • Share UPI technology with other nations to earn additional foreign exchange and increase India’s global soft power.
    • Already rolled out UPI in countries like UAE, Singapore, and Nepal, showcasing its potential for international adoption.
Additional Information: About National Payments Corporation of India (NPCI):
  • It is an umbrella organisation for operating retail payments and settlement systems in India.
  • It is an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.
  • It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013), with an intention to provide infrastructure to the entire Banking system in India for physical as well as electronic payment and settlement systems.
  • Focus:  To bring innovations in the retail payment systems through the use of technology for achieving greater efficiency in operations and widening the reach of payment systems.
Source: The Hindu

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