UNIFIED PAYMENTS INTERFACE (UPI)

• Unified Payments Interface (UPI) is a revolutionary payment system launched in 2016 by the National Payments Corporation of India (NPCI). 
• It has significantly transformed India’s digital payment ecosystem by enabling instant, real-time money transfers between bank accounts using a mobile application.

Institutional Background

NPCI (National Payments Corporation of India):

• Set up in 2008 by the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).
• Registered under Section 8 of the Companies Act, 2013 as a “not-for-profit” organization.
• Operates under the provisions of the Payment and Settlement Systems Act, 2007.
• NPCI is the umbrella organization for retail payments in India (e.g., RuPay, IMPS, AEPS, BHIM, FASTag, etc.).

How UPI Works

• Merges multiple bank accounts into a single mobile application.
• Enables seamless fund routing, merchant payments, utility bill payments, and peer-to-peer transfers.
• Works 24x7, even on weekends and holidays.
• Uses a Virtual Payment Address (VPA), removing the need to share sensitive banking information.

Salient Features of UPI

• Immediate Fund Transfer: Real-time and instant, round-the-clock service.
• Peer-to-Peer (P2P) and Peer-to-Merchant (P2M) payments supported.
• Single-click 2-Factor Authentication ensures security and convenience.
• Supports utility bills, school fees, EMIs, insurance, QR code payments, etc.
• Interoperability: One UPI app can access multiple bank accounts.
• Transaction Limit: RBI increased limit to ₹5 lakh (especially for education and healthcare sectors).
• In-built grievance redressal system through app-based complaint registration.

Variants of UPI

UPI123Pay (Launched in March 2022)

• Designed for feature phone users.
• Key Technologies:
  • IVR (Interactive Voice Response)
  • Missed call-based payments
  • Sound-based proximity payments
  • App-based functionality (even on non-smartphones)
• Available in 12 regional languages.
• Transaction limit: ₹10,000 (increased from ₹5,000 by RBI)

UPI Lite (Launched in 2022)

• Designed for small-value offline transactions without internet or UPI PIN.
• Useful in low-connectivity areas.
• Transaction limit: ₹1,000 (per transaction)
• Wallet limit: ₹5,000 (previously ₹2,000)
• Boosts financial inclusion and faster micro-payments.

Internationalisation of UPI

NPCI International Payments Limited (NIPL):

• Set up in 2020 to expand UPI, RuPay, and other Indian digital payment systems globally.

UPI Global Acceptance:

• Enables QR-based merchant payments abroad using UPI apps (e.g., Singapore, UAE, Bhutan, France, etc.)

Foreign Inward Remittance (FIR):

• Allows Indians to receive international remittances directly into UPI-linked bank accounts.

NRI Inclusion:

• UPI access extended to Non-Resident Indians (NRIs) holding NRE/NRO accounts.
• OTP authentication via international mobile numbers enabled.

UPI One World:

• Enables foreign tourists in India to make UPI payments to merchants and vendors.
• Pilot launched with countries like Singapore during G20.

UPI in Numbers (As of 2025)

• Over 12 billion transactions monthly.
• Covers over 400 banks and third-party apps (Google Pay, PhonePe, Paytm, etc.)
• Contributes over 50% of retail digital payments volume in India.
• Lauded globally for being a public digital infrastructure success story.

Security Framework

• Two-factor authentication (mobile number & UPI PIN)
• No need to enter sensitive bank information for each transaction.
• RBI and NPCI constantly upgrade security protocols.

Benefits of UPI

• Financial Inclusion: Reaches rural and low-income populations.
• Ease of Use: User-friendly interface, no need to remember IFSC or account numbers.
• Cost-Effective: Zero charges for most UPI-based transactions.
• Boost to Digital India and cashless economy goals.

Challenges

• Cyber-security Risks: Phishing, fraud, and scams increasing.
• Internet Dependency: Still a hurdle in remote areas.
• Bank Downtimes: Can impact real-time payments.
• Scalability Concerns: Need for robust infrastructure to handle growing volume.