UPI, or Unified Payments Interface, is a real-time, instant payment system that enables inter-bank transactions between individuals in India. Developed by the National Payments Corporation of India (NPCI), a regulatory authority for retail digital payments in the country, UPI was launched in 2016 as a joint initiative between NPCI and the Indian Banks’ Association (IBA) with the aim of creating a robust payment and settlement infrastructure.
UPI enables multiple bank accounts to be consolidated into a single mobile application, combining various banking features and enabling seamless fund routing and merchant payments. Initially used primarily for person-to-person (P2P) transactions, UPI has seen a shift towards person-to-merchant (P2M) transactions in recent years.
Success of UPI in India
UPI has played a significant role in driving the digital payment revolution in India. In the calendar year 2022, UPI processed over 74 billion transactions worth Rs 125.94 trillion, and as of December 2022, UPI has recorded 7.82 billion transactions worth Rs 12.82 trillion. Over 40% of all retail digital payments in India are now made through UPI, making it one of the most popular digital payment systems in the country.
UPI’s widespread popularity is due to its simplicity and security, as well as the incentives it offers merchants, including the absence of merchant discount rates and the ability to accept transactions as small as one rupee. From small roadside shops to large brands, UPI is accepted by a wide range of merchants across India.
Benefits of Using UPI
UPI offers a simplified and hassle-free way to make online payments, as well as a safe and secure mode of money transfer. Users can make payments for bills, shop on e-commerce websites, and even make payments by scanning QR codes at nearby stores. Additionally, using UPI regularly can also earn users discount vouchers, cashback, and other rewards.
General UPI Limits
At present, the limit for transactions via UPI is set at 2 lakhs by the bank and NPCI, although some banks may have a limit of only 1 lakh. This limit may change from time to time, and if a user needs to transfer more than the set limit, they can use other payment applications such as IMPS, NEFT, and bank transfers.
E-Rupee/Digital Rupee/Central Bank Digital Currency (CBDC)
E-Rupee, also known as digital rupee or central bank digital currency (CBDC), is a digital form of paper money. With the launch of the CBDC by the Reserve Bank of India (RBI), India has taken a step towards becoming a digitally-driven country.
E-Rupee functions like a digital wallet, allowing users to transfer money in the same denominations as physical cash. Unlike a traditional e-wallet, however, e-Rupee does not earn interest and is targeted at individuals without bank accounts, as well as those with mobile phones.
The first phase of the pilot for e-Rupee will involve four banks – SBI, ICICI Bank, IDFC First Bank, and YES Bank – with four more banks – HDFC Bank, Bank of Baroda, Union Bank, and Kotak Mahindra Bank – being added subsequently. The pilot will be carried out in 13 cities in a phased manner.
In the coming years, e-Rupee could potentially replace UPI if it proves to be efficient, trustworthy, and free of technical glitches.
MCQs on UPI
- What is the Unified Payments Interface (UPI)?
A. An instant real-time payment system
B. A digital form of paper money
C. A digital wallet
D. An e-commerce platform
- What was the goal of forming the National Payments Corporation of India (NPCI)?
A. To create a robust payment and settlement infrastructure
B. To launch the Digital Rupee
C. To shift users from UPI to e-Re
D. To promote digital transactions
- What is the maximum limit for UPI transactions at present?
A. Rs 2 lakhs
B. Rs 1 lakh
C. No limit
D. Rs 10,000
