Since its inception in 2016, Unified Payments Interface (UPI) has continually demonstrated its growing popularity and widespread acceptance among the masses. Its transaction volume surged by approximately 43 per cent in September 2024 compared to the same month last year. The transaction value also rose significantly, increasing by around 31 per cent to reach Rs 20.64 lakh crore in September 2024.
According to the article ‘State of the Economy’ in the RBI’s November bulletin, “India’s Unified Payment Interface (UPI), an open-ended system that powers multiple bank accounts into a single mobile application of any participating bank, is propelling inter-bank peer-to-peer and person-to-merchant transactions seamlessly. Payment systems in India operate on a 24 by 7 by 365 basis. Functionalities like offline payments, payments through feature phones, and conversational payments have been incorporated. The internationalisation of the UPI is progressing rapidly.”
The easy and quick payment facility has different variants to suit the needs of different people. This is evident with the increasing number of transactions every year.
2023-24 - 1311295 lakh
2022-23 – 837144 lakh
2021-22 – 459561 lakh
2020-21 – 223307 lakh
2019-20 – 125186 lakh
Source: RBI data
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Anuj Agarwal, Industry Platform Leader for Banking, India, Capgemini, observes the trend in innovation-led instant payments and observes that ‘Unified Payments Interface (UPI) accounts for about three-fourths of the country’s retail payments’.
Agarwal credits innovation behind UPI’s growth and adds, “With National Payments Corporation of India (NPCI) adding more features such as UPI Lite X, Hello! UPI, and UPI 123Pay, the reach of instant payments in India will expand further, removing barriers such as inadequate network coverage, lack of smartphones, or even language. This will further provide a boost to instant payments in India and incentivize payment innovation from fintechs and banks alike.”
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What Are The Different Variants Of UPI?
UPI:
UPI is an instant payment system for peer-to-peer and peer-to-merchant transactions. Unlike traditional payment systems, it is a faster option to make payments, available 24 hours a day, and is available through mobile apps which makes it an easy-to-use option.
The National Payments Corporation of India (NPCI) has set the per-day transaction limit for UPI transfers up to Rs 1 lakh for usual transfers. For special transactions like capital markets, insurance collections, and foreign inward remittances, it is Rs 2 lakh, and for tax payment, or for an initial public offering, retail direct scheme payment, and for medical and educational services, the limit is higher at Rs 5 lakh.
Within this limit, banks may decide on a lower per-day transaction limit or put restrictions on the number of daily transactions.
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UPI Lite:
UPI Lite is an online wallet. One can transfer money in it and use it for small-value transactions without using the PIN every time one does a transaction. The wallet is useful for small and frequent payments like payments for parking, vegetable vendors, etc. The wallet can help keep account statements clean by facilitating small-value payments through the wallet. These transactions will appear in the wallet statement rather than cluttering the bank statement.
During the October Monetary Policy Committee (MPC) meeting, RBI announced an enhancement of UPI Lite's limits, increasing the daily limit from Rs 2,000 to Rs 5,000 and the per-transaction limit from Rs 500 to Rs 1,000. The rollout of the increased limits is expected soon.
Due to no requirement to enter the PIN for authorising the transaction, it is hassle-free for users, especially the elderly, as they do not need to remember the PIN. It simply requires selecting the receiver, entering the amount, and paying. The money is transferred in real-time.
UPI Lite X:
UPI Lite X is the same as UPI Lite except for the offline feature. It was launched in September 2023 and offers the same facility as UPI Lite but without internet connectivity.
In short, it is an extension of UPI Lite, allowing transactions even without internet connectivity or in areas with poor network coverage. Notably, neither the payer nor the receiver needs internet access for this feature to work, making it particularly useful in remote areas, basements, elevators, flights, etc.
To utilise this facility, both the payer and receiver must have UPI Lite X enabled on their devices.
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UPI 123 Pay:
UPI 123 Pay offers a UPI facility on feature phones. It was launched in March 2022 to include the populace not having smartphones. The transaction limit is currently limited to Rs 5000 per transaction, but to widen its use cases, RBI in its October MPC meeting, decided to enhance this to Rs 10,000.
In an October 25, 2024, circular, NPCI issued guidelines for the UPI service providers to increase the transaction limit. The change in limit became applicable with immediate effect, but NPCI has kept the deadline of January 1, 2025, for the service providers to incorporate all changes in their systems.
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UPI Circle:
This is the latest addition to the UPI family. The UPI Circle feature extends the UPI functionality to both the account holder (primary user) and other individuals (secondary users) whom the primary user chooses to include under the same UPI setup.
The primary user needs to have a bank account linked with the UPI. However, for secondary users, it is not required. They may or may not have a bank account. The primary user delegates secondary users (maximum up to 5 secondary users) to make payments on behalf of the primary user.
NPCI sets per day transaction limit at Rs 15,000, and no transaction can be more than Rs 5000 in the full delegation.
It can be shared between parents and adult children where parents allow children to spend money and at the same time they can monitor their spending. People can use it for their elderly by making payments on their behalf and saving them from digital hassles. There could be other use cases too.
The primary user has the power to set the transaction limit for every secondary user separately, and it also offers partial delegation where the secondary user can make merchant payments and not set any autopay transaction. Primary users can also set the ‘Approval every payment’ option where no transaction by the secondary user can go without their approval.