Why in news?

Unified Payments Interface (UPI) is processing nearly 21 billion transactions monthly, cementing its role as a key financial infrastructure for consumers and small merchants.

About UPI

UPI is a 24 x 7 real time interoperable platform that allows users to link their various bank accounts to make interbank payments and instantly transfer the funds between two bank account using an UPI app. The pilot launch on UPI was done on 11th April 2016 by Dr. Raghuram G Rajan, Governor, RBI at Mumbai.

Institutional & Structural Framework

• The Architect: National Payments Corporation of India (NPCI)—an umbrella organization for operating retail payments and settlement systems in India.
• The Technology: Built on the IMPS (Immediate Payment Service) infrastructure.
• Participants in UPI: UPI App, Payer/Payee PSP, Remitter Bank, Beneficiary Bank, Users and Merchants.
• Bharath Interface for Money (BHIM) is a UPI-based payment app developed by NPCI.
• UPI supports both financial and non-financial transaction like PIN change.

Working of UPI

Features of UPI

• Immediate money transfer through mobile device 24*7 and 365 days
• 2 Factor Authentication – The first factor is mobile number linked to the user’s bank and the second is the UPI PIN.
• Virtual Payment Address (yourname@bank) for privacy
• QR Code and intent based payments
• Multiple method of payment – using Mobile number, Bank details, VPA and QR Code.

Initiatives under UPI

• UPI LITE: An on-device wallet for instant, PIN-less micro-payments up to ₹1,000.
• UPI 123PAY: A non-internet based system specifically for feature phone users to transact via IVR calls, missed calls, or sound-based up to ₹10,000.
• UPI LITE X: An enhanced version of UPI Lite that allows completely offline transactions using NFC (Near Field Communication).

Users and Merchants fee

Global expansion of UPI

• UPI has been adopted by countries like Singapore, UAE, France, Mauritius, Sri Lanka, Nepal, Bhutan, and Qatar.

Conclusion

UPI is not just a payment system; it is the foundational layer of India’s Digital Stack, driving financial inclusion, economic transparency, and global fintech diplomacy.