Unified Payments Interface

Overview

Unified Payments Interface (UPI) is an Indian instant payment system and protocol developed by the National Payments Corporation of India (NPCI) in April 11th 2016. The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M) transactions. It is used on mobile devices to instantly transfer funds between two bank accounts using only a unique UPI ID. It runs as an open source application programming interface (API) on top of the Immediate Payment Service (IMPS), and is regulated by the Reserve Bank of India (RBI). Major Indian banks started making their UPI-enabled apps available to customers in August 2016, and the system is today supported by almost all Indian banks. As of 2025, 50% of the world's digital transactions are conducted by India's UPI platform with over 250 billion annual transactions worth US$3.4 trillion. In 2021, UPI in India had over 500 million active users. In the month of August 2025, 20 billion UPI transactions worth ₹ 25 trillion (about US$293 billion) were processed by the UPI system, processing an average of nearly 7,500 transactions every second. UPI is the largest real-time payment system in the world. it handles more than 640 million transactions every day, compared to Visa's 639 million. Furthermore, the successful execution of an instant payment system at such an enormous scale has made it a soft power tool for India and is often cited as the most transformative and successful financial technology innovation India has developed. As of 2025, UPI accounts for 84% of digital payments in India. On 25th August 2026, UPI completed 10 years of functioning and was responsible for transactions worth ₹ 314 Trillion in FY 2025-26 representing an increase of more than 4000-fold since the year of its inception. In terms of number of transactions, there has been almost a 13000 fold increase in transactions with 241.62 billion transactions concluded in FY 2025–26.

History

In April 2009, the National Payment Corporation of India (NPCI) was formed to integrate all the payment mechanisms in India and make them uniform for all retail payments. In March 2009, the Reserve Bank of India (RBI) reported an annual average of just six non-cash transactions per capita, despite over 10 million retailers accepting card-based payments. A parallel challenge was combating black money and corruption, which were primarily facilitated by cash transactions. RBI released a vision statement in 2012 for a period of four years that indicated commitment towards building a safe, efficient, accessible, inclusive, interoperable, and authorized payment and settlement system in India. It was also part of the Green Initiative to decrease the usage of paper in the domestic payments market. UPI was officially launched in 2016 for public use. The pilot launch took place on 11 April 2016, inaugurated by Dr. Raghuram G. Rajan, Governor of the Reserve Bank of India, in Mumbai, with 21 member banks participating. Under RBI guidance, NPCI became the primary body tasked with developing a new payment system which was simple, secure, and interoperable. UPI works on a four-pillar push-pull interoperable model where there will be a remitter/beneficiary front-end PSP (payment service provider) and a remitter/beneficiary back-end bank that settles the monetary transaction for the users. According to the CEO of Netmagic Solutions, UPI became one of the most successful deep-tech financial innovations India has produced. In December 2019, noting the success of UPI, Google suggested that the US Federal Reserve Board should follow UPI as an example in developing FedNow, a real-time payment system for the United States. With the exponential growth of UPI, India became the world's largest real-time payment market with 25.5 billion annual transactions in 2020 as per data from ACI Worldwide and GlobalData. This put the country ahead of China, South Korea, Thailand and the United Kingdom. As per the Economist Intelligence Unit Report 2021, UPI has made India a leader in the global real-time payment market followed by China and South Korea. After the decision of the Ministry of Finance to nullify the merchant discount rate (MDR) in 2019 from UPI, the number of low value transactions skyrocketed, making huge gains on real-time transaction volume data. Countries such as Brazil, Bahrain, Saudi Arabia, Singapore, the United States, and the European Union are exploring options to implement a UPI-like system in their own domestic markets. From 1 January 2019, UPI became a popular payment option for initial public offerings (IPOs). The transaction limit was enhanced from ₹100,000 to ₹200,000 in March 2020. From December 2021, RBI again increased the limit to ₹500,000 for Retail Direct Scheme and IPO applications. To make UPI economically feasible for payment companies, RBI is considering a merchant discount rate (MDR) on future UPI transactions. In its first monetary policy for the 2022–23 financial year, RBI proposed a cardless cash withdrawal facility from ATMs using UPI-based QR codes. In partnership with the NSDL Payments Bank and NPCI, ToneTag launched VoiceSE, which will enable 40 crores (400 million) feature phone users to make UPI payments using voice in Hindi, Telugu, Tamil, Malayalam, Kannada, and Bengali languages. According to Redseer Strategy Consultants, in 2023, UPI usage has expanded outside of metro areas. Currently, around 70% of UPI users are from places other than Tier-1 cities with over 80% of newly registered users originating from Tier-2 cities. On 8 August 2024, RBI suggested raising the UPI tax payment ceiling from ₹1 lakh to ₹5 lakh. Professor Carlos Montes, Lead of the Innovation Hub for Prosperity at the Cambridge Judge Business School, argues that UPI gives other nations a chance to absorb knowledge from India's experience and get inspiration for implementing it in their own nations. The expansion of UPI demonstrates that the government is ensuring that the technology it creates for citizens is easy to use, easily accessible, and constantly improved, which accounts for the high rate of UPI acceptance in India. In 2025, UPI surpassed Visa in digital payments, according to the International Monetary Fund. Over 640 million transactions are handled via UPI per day, compared to 639 million by Visa.

UPI 2.0

On 16 August 2018, UPI 2.0 was launched, which enabled users to link their overdraft accounts to a UPI handle. Users were also able to pre-authorise transactions by issuing a mandate for a specific merchant. This version also included a feature to view and store an invoice for each transaction. An AutoPay facility for recurring payments was also added. As of August 2021, State Bank of India, Bank of Baroda and Paytm Payments Bank have been live on UPI AutoPay, each registering 660,000, 204,000, and 186,000 mandates, respectively. From 15 March 2022, the government removed the need for debit cards for UPI registration. NPCI is planning to expand AutoPay to international markets and operationalize real-time payment dispute resolution mechanisms covering 90% of the complaints by September 2022. From 8 June 2022, RBI allowed linking RuPay credit cards with UPI. Customers can now make credit card payments using UPI, in the absence of a physical card. NPCI developed a real-time feature that will reduce the 24-hour time period taken by banks to unblock funds over time-out or transaction declines to 30 seconds. The service was officially launched on 20 September 2022. On 7 December 2022, RBI announced that UPI will upgrade from single-block-single to single-block-multiple debit for recurring transactions and investments in securities. This feature is expected to help users block funds for specific purposes and release them when needed. RBI on 6 April 2023 proposed allowing credit on UPI through pre-approved bank lines which would help customers reduce their dependence on credit cards. On its point-of-sale devices, Razorpay introduced a quick refund feature for UPI in 2024. Compared to the industry average of five to six business days, the reimbursement will be initiated within 2 minutes. After introducing the first card-less UPI automated teller machine (ATM), Hitachi Payment Services is now working on creating a UPI-based cash recycler machine (CRM). It will operate on the opposite principle to UPI ATMs'. The RBI and the NPCI are collaborating with the company to explore the feasibility of permitting deposits based on UPI. On August 29, 2024, during the Global Fintech Fest, RBI Deputy Governor T Rabi Sankar introduced the UPI Interoperable Cash Deposit (UPI-ICD) feature for cash recycler machine. In October 2024, the transactions using RuPay credit cards via UPI apps have doubled in the first seven months of FY25. It reached ₹63,825.80 crore—up from ₹33,439.24 crore in during the same period last fiscal. International mobile numbers of ICICI Bank's non-resident Indian clients can be used to make UPI payments in India. In ten nations—the United States, United Kingdom, United Arab Emirates, Canada, Singapore, Australia, Hong Kong, Oman, Qatar, and Saudi Arabia—the bank provides this service.

UPI 123PAY

As part of a financial inclusion initiative, NPCI, with fintech start-up Naffa Innovations and their product ToneTag, started working on developing a voice-based payment service for feature phone users in low connectivity zones over UPI payment ecosystem under Interactive Voice Response (IVR) project in 2021. The system utilised Dual Tone Multi-Frequency (DTMF) signalling technology with two-factor authentication (2FA) flow for peer-to-peer (P2P) transaction. From September 2020 to June 2021, it was under beta testing while awaiting RBI approval for large-scale deployment. The beta testing and pilot experiment were completed by October 2021 and RBI started formulating guidelines for nationwide use. RBI governor Shaktikanta Das launched the service UPI 123PAY on 8 March 2022, with an aim to help almost 40 crores (400 million) feature phone users in the country. Until then, UPI payments were only possible through payment applications on smartphones and USSD-based service for feature phones. However, as per Deputy Governor T Rabi Shankar, the latter has been found to be cumbersome due to the unavailability of the services on several mobile networks. UPI 123PAY has four options for payment.

App-based functionality where a mobile phone manufacturer can install a UPI app through over-the-air programming, that can be used for payment. Missed calls based: where a customer can use a dedicated merchant payment number by giving a missed call. The incoming authentication call will ask for PIN verification to complete the transaction. Interactive Voice Response (IVR) based where the payment transaction will be completed using pre-defined phone numbers. Payment in offline mode through sound-based proximity data communication. As per NPCI, some of the early use cases involve FASTag recharges, insurance payments, and EMI collections. As of 20 September 2022, Ultracash Technologies, in collaboration with Bharat Petroleum, helped 200,000 active users make LPG booking and payment through UPI 123PAY. As of October 9, 2024, the RBI increased the transaction limit from ₹5,000 to ₹10,000. Banks and service providers have until January 1, 2025, to make the required adjustments.

UPI 3.0

NPCI started introducing new features under UPI 3.0 from 2024.

Conversational Voice Payments

At the Global Fintech Fest 2024, the National Payments Corporation of India (NPCI), Indian Railway Catering and Tourism Corporation (IRCTC), and CoRover introduced a feature described as "Conversational Voice Payments" for Unified Payments Interface (UPI). The feature enables users to initiate transactions using voice commands or by entering a UPI ID or mobile number. When a mobile number is provided, the system retrieves the associated UPI ID and generates a payment request through the user's default UPI application. The service is integrated with CoRover's BharatGPT and supports multiple Indian languages. The feature has also been incorporated into AskDISHA, a virtual assistant used by Indian Railways and IRCTC, allowing users to book tickets and complete payments through voice interaction.

Credit lines

The RuPay credit card on UPI facility is responsible for credit transactions of ₹10,000 crore per month. Approximately 100 to 200 crores of the ₹10,000 crore in credit card spending through UPI have been made through credit lines, according to NPCI MD and CEO Dilip Asbe. The pre-approved, small-ticket, short-term loans on UPI are called credit lines. On July 19, 2024, The New Indian Express published an article stating that Punjab National Bank, Axis Bank, State Bank of India, and ICICI Bank had already started using the UPI credit line product on a trial basis. When it comes to granting pre-approved loans through credit lines on UPI, ICICI Bank is the industry leader. On August 23, 2024, PhonePe introduced the "Credit Line on UPI" service. It makes low-cost, high-volume retail loans available.

UPI Vouchers

Google Pay revealed at the Global Fintech Fest 2024 that it will be launching UPI Vouchers, a capability that was first made available for COVID-19 vaccine payments. This feature will be released in the second half of 2024. With UPI Vouchers, users can transfer prepaid vouchers that are connected to the smartphone number of the recipient. The recipient of these vouchers does not need to connect their bank account to UPI in order to use them for payments. It is now possible for businesses and individuals to issue and use UPI vouchers more easily thanks to the adaptation of this feature for a wider range of industries. In addition to making financial transactions for users easier, UPI Vouchers offer a smooth digital payment option for a variety of scenarios, including corporate gifts, government programs, and others.

UPI Circle

In its monetary policy announcement in August 2024, the RBI implemented the delegated payments feature through UPI. By doing this, a person (the primary user) could grant permission to another person (the secondary user) to utilize their bank account to perform UPI transactions. The primary user would choose the transaction limit. The UPI Circle feature was launched on 19 August 2024. Two kinds of delegation are possible with UPI Circle. Full delegation, in which the primary user gives the secondary user the authority to start and finish transactions up to specified expenditure limitations without needing additional permission. Additionally, there is partial delegation, in which the primary user must authenticate and complete the payment using their UPI PIN before the secondary user may start a transaction. With UPI Circle, one can use platforms for collaboration or gig economies to create micro-communities where people can pool resources or settle payments in real time. On August 22, 2024, PhonePe released the feature on its platform. At the Global Fintech Fest 2024, Google Pay announced that it will be introducing the UPI Circle feature. The second half of 2024 will see the release of this feature. NPCI guidelines for UPI ecosystem members,

For Primary and Secondary users, separate user journeys are provided by payment service providers and UPI apps. Users are allowed to select the UPI app of their choosing. App passcodes and biometrics (facial or fingerprint) must be required for all secondary users. The primary user must first select a contact number from the contact list and then scan the QR code or input their UPI ID in order to link. Eventually, primary users will be able to connect with secondary users by choosing a contact number from the contact list alone, rather than scanning a QR code. Up to five secondary users may be delegated by a primary user, and only one primary user may accept delegation from a secondary user. Members must make sure that, in cases of full or partial delegation, the primary user grants permission to the secondary user. Members are responsible for making sure the principal user has restricted access to set use limits for their secondary users. Members must guarantee a maximum monthly limit of approximately 15,000 per delegate and a maximum per transaction limit of approximately 5,000 for full delegation. The current UPI restrictions will apply in the event of partial delegation. Members are responsible for making sure that, following the successful connection of primary and secondary users for both full and partial delegation, a daily transaction limit of about 5,000 is set for the first 24 hours of the cooling period. Members are required to make certain that transactions made by secondary users are visible to the primary user on their bank account statement and UPI app. Members must abide by RBI regulations regarding "Harmonization of Turn Around Time" and compensating customers for unsuccessful transactions through authorized payment methods. UPI transactions must provide online dispute resolution capabilities.

Agentic Payment

In order to provide Agentic Payments on ChatGPT and investigate AI-driven commerce on a national level, Razorpay, NPCI, and OpenAI are conducting a pilot project as of October 2025. It will make digital payments intelligent, conversational, and easy. Before completing a transaction, customers will set aside money for particular merchants in order to secure their payment passwords. It guarantees that payments only proceed after a user confirms. With options for instantaneous payment cancelation and real-time tracking, users maintain control. The effort, which is based on UPI Circle and UPI Reserve Pay, aims to provide smooth UPI transactions for AI-native shopping. Razorpay, NPCI, and OpenAI will investigate AI-based payment use cases as part of this project, including safe and customized AI commerce through conversational checkout and shopping experiences. Axis Bank and Airtel Payments Bank are banking partners. Bigbasket is the first retailer to be able to test this service.

Technical controls and operational limits (2025)

On 1 August 2025, the NPCI implemented new technical and operational restrictions across UPI applications to enhance system stability and reduce the risk of fraud. The changes include daily limits on balance enquiry and “list accounts” API calls, a regulated processing window for autopay mandate scheduling, and caps.

Transaction Fees

From 2019 onwards UPI Transactions were exempt from charges. However, the Lok Sabha passed a bill in August 2026 that amends the Payment and Settlements Systems Act, 2007 to authorise the government to permit the levy of charges on UPI. The charges may be levied by banks and service providers. The charge known as Merchant discount rate is expected to be in the range of 0.3%-0.5% of the transaction & is also expected to be levied on transactions above a threshold. It is also expected that the levy will only be on payments made to businesses The levy of the fee is expected to help the banks and other institutions recover their costs in maintaining the infrastructure needed to enable the entire payment ecosystem. On 14 September 2026, the Indian government notified provisions prohibiting banks and payment-system providers from imposing direct or indirect charges on UPI transactions of up to ₹2,000 and payments using RuPay debit cards. Whether charges would apply to higher-value UPI transactions, and how they would be levied, remained undecided. From 15 October 2026, a standard merchant discount rate (MDR) of 0.4% will apply to person-to-merchant UPI transactions above ₹2,000, capped at ₹300 per transaction. Railway, fuel, insurance, telecom and government utility payments above ₹2,000 will instead attract a flat ₹5 MDR. Capital-market payments will attract a separate rate of 0.02%, capped at ₹300. Eligible small merchants under the person-to-person-merchant (P2PM) framework will remain exempt, including when an individual payment exceeds ₹2,000. Consumers and peer-to-peer transfers will remain free of charges, and merchants will not be permitted to pass MDR charges on to customers.