Daily Current Affairs : 3-January-2025

In a recent decision, the National Payments Corporation of India (NPCI) extended the deadline for Third-Party App Providers (TPAPs) to comply with the 30% transaction cap on Unified Payments Interface (UPI) transactions. The new deadline for compliance is 31st December 2026. This extension has significant implications for major TPAPs, such as PhonePe and Google Pay, which together account for over 80% of all UPI transactions.

What is the 30% Transaction Cap?

The 30% cap on UPI transaction volumes per TPAP was introduced by the NPCI in November 2020. The goal of this cap is to reduce risks arising from the dominance of a few players in the UPI ecosystem and to promote a more balanced and competitive environment. This measure ensures that no single TPAP has an excessive share of the market, making the system more stable and less prone to operational risks.

  • Transaction Volume Limit: The 30% cap applies to the average UPI transaction volume over the past three months.
  • Impact on TPAPs: Providers that exceed this limit must stop onboarding new customers until they reduce their transaction volumes to meet the cap.
Background of the NPCI’s Decision

Initially, the 30% cap was set with a deadline for compliance. However, in December 2022, NPCI extended the deadline, and it has now been pushed further to 2026. This delay gives TPAPs more time to adjust their operations and reduce their market share in UPI transactions.

What are TPAPs?

Third-Party App Providers (TPAPs) are non-bank entities that offer UPI-based financial services through mobile applications or platforms. These apps act as intermediaries between users and their sponsor banks, facilitating UPI transactions. While TPAPs are not themselves financial institutions, they play a crucial role in expanding access to digital payments.

Role of NPCI

The NPCI, established by the Reserve Bank of India (RBI) and the Indian Banks’ Association, is responsible for the operation and regulation of payment systems in India. Its role is to ensure a smooth, secure, and fair digital payments ecosystem for users and financial institutions alike.

Important Points:
  • NPCI Extension: The National Payments Corporation of India (NPCI) has extended the deadline for Third-Party App Providers (TPAPs) to comply with the 30% transaction cap on UPI transactions until 31st December 2026.
  • Impact on Major TPAPs: PhonePe and Google Pay, which together account for over 80% of UPI transactions, are the most affected by this cap.
  • Transaction Cap: Introduced in November 2020, the 30% cap aims to reduce risks from market concentration and ensure a more balanced UPI ecosystem.
  • Compliance Requirements: TPAPs exceeding the 30% cap must stop onboarding new customers until they reduce their transaction volumes to below the limit.
  • Background of the Cap: The cap is based on the average UPI transaction volume over the past three months, and TPAPs that exceed the cap have been given two years to comply in phases.
  • NPCI’s Role: The NPCI, established by RBI and the Indian Banks’ Association under the Payment and Settlement Systems Act, 2007, regulates payment systems in India.
  • What are TPAPs?: Third-Party App Providers (TPAPs) are non-bank entities that provide UPI-based financial services through apps or platforms, acting as intermediaries between users and sponsor banks.
Why In News

Recently, the National Payments Corporation of India (NPCI) extended the deadline for Third-Party App Providers (TPAPs) to comply with the 30% transaction cap on UPI transaction volumes until 31st December 2026, giving these providers more time to adjust their market share and operations in line with the new regulations.

MCQs about NPCI Extends UPI Cap Deadline for TPAPs to 2026
  1. What is the new deadline set by NPCI for TPAPs to comply with the 30% transaction cap on UPI volumes?
    A. 31st December 2025
    B. 31st December 2026
    C. 31st December 2024
    D. 31st December 2023
    Correct Answer: B. 31st December 2026
    Explanation: The NPCI extended the deadline for TPAPs to comply with the 30% transaction cap until 31st December 2026, allowing more time for adjustment.
  2. Which of the following TPAPs collectively hold over 80% of UPI transactions in India?
    A. Paytm and Amazon Pay
    B. PhonePe and Google Pay
    C. HDFC Bank and ICICI Bank
    D. SBI and Axis Bank
    Correct Answer: B. PhonePe and Google Pay
    Explanation: PhonePe and Google Pay together account for over 80% of UPI transactions in India, making them the key players impacted by the transaction cap.
  3. What is the purpose of the 30% transaction cap imposed by the NPCI on TPAPs?
    A. To limit the use of UPI for non-financial transactions
    B. To reduce concentration risks and ensure a balanced UPI ecosystem
    C. To increase competition between banks
    D. To encourage more foreign investment in UPI platforms
    Correct Answer: B. To reduce concentration risks and ensure a balanced UPI ecosystem
    Explanation: The 30% cap was introduced to mitigate risks arising from the dominance of a few players in the UPI ecosystem and to promote a more competitive and balanced environment.
  4. What must TPAPs do if they exceed the 30% transaction cap imposed by NPCI?
    A. Increase transaction volumes
    B. Stop onboarding new customers
    C. Reduce transaction fees
    D. Collaborate with other TPAPs
    Correct Answer: B. Stop onboarding new customers
    Explanation: TPAPs exceeding the 30% cap must halt onboarding new customers until they bring their transaction volumes within the prescribed limit.

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