Unified Payments Interface (UPI)

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Why in News?

With UPI processing 21 billion transactions per month, concerns have emerged on ensuring its long-term financial sustainability while keeping person-to-person (P2P) and small-merchant transactions free.

Description:

1.    Basic Identity:

  • Full form: Unified Payments Interface
  • Nature: Real-time digital payment system
  • Category: Retail payments | Digital Public Infrastructure (DPI)
  • Transaction type: Account-to-account (no stored value)

2.   Institutional Framework:

  • Developed & operated by: National Payments Corporation of India (NPCI)
  • Regulator: Reserve Bank of India (RBI)
  • Legal basis: Payment and Settlement Systems Act, 2007
  • Launch year: 2016

3.   Technical Architecture:

  • Built on IMPS (Immediate Payment Service) infrastructure
  • Settlement: Real-time, 24×7 (including holidays)
  • Interoperability: Across banks and apps
  • Authentication: Device binding, Two-factor authentication (2FA), UPI PIN (bank-issued)

4.   Key Features:

  • Links multiple bank accounts to a single mobile application
  • Uses Virtual Payment Address (VPA) (e.g., name@bank)
  • QR-based payments supported
  • Works without sharing bank account details
  • Supports push (pay) and pull (collect) transactions

5.   Transaction Types Supported: P2P (Person-to-Person), P2M (Person-to-Merchant), Merchant QR payments, UPI AutoPay / Mandates (recurring payments), In-app payments, Bill payments (via Bharat BillPay integration), Credit-linked UPI payments (via banks/NBFCs).

6.   Cost & Charges:

  • P2P transactions: No charges
  • Zero MDR policy for UPI transactions (government policy decision)
  • UPI itself does not mandate charges; pricing is policy-driven
  • Government provides incentive support to banks/payment ecosystem to sustain zero MDR

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