Unified Payments Interface (UPI): What Are Its Variants, Transaction Limits And Benefits
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 ‘State of the Economy’ article 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 continuous 24/7/365 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 tailored to accommodate various needs, evident from the rising number of transactions each year.
What Are The Different Variants Of UPI?
UPI is an instant payment system facilitating peer-to-peer and peer-to-merchant transactions. Unlike traditional payment systems, it offers a faster payment option available round-the-clock via mobile apps, making it easy to use.
The National Payments Corporation of India (NPCI) has set a 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, while for tax payments, initial public offerings, retail direct scheme payments, and medical and educational services, the limit is higher at Rs 5 lakh. Banks may choose lower per-day transaction limits or set restrictions on the number of daily transactions within this framework.
UPI Lite: This variant functions as an online wallet, facilitating small-value transactions without requiring a PIN for each transaction. It benefits users making frequent small payments, such as for parking or at local vendors. By using UPI Lite, users can keep their account statements free from clutter, as these transactions are logged only in the wallet statement. During the October Monetary Policy Committee (MPC) meeting, the 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 higher limits is expected soon. Due to no requirement to enter the PIN for authorization, it is user-friendly, especially for the elderly, as it only involves selecting the receiver, entering the amount, and paying, with real-time money transfers.
UPI Lite X: This variant extends UPI Lite’s functionality to include offline capabilities. Launched in September 2023, UPI Lite X allows transactions without internet connectivity, supporting transactions in areas with poor network coverage. Neither the payer nor the receiver requires internet access for this feature, making it valuable in remote areas, basements, elevators, flights, etc. To utilize this facility, both payer and receiver must have UPI Lite X enabled on their devices.
UPI 123 Pay: Introduced in March 2022, UPI 123 Pay offers UPI functionality on feature phones, thus including people without smartphones. The transaction limit is currently Rs 5000 per transaction, but RBI plans to enhance this to Rs 10,000 to broaden its usage. In an October 25, 2024, circular, NPCI issued guidelines for UPI service providers to increase this limit. These changes are now applicable, with NPCI setting a deadline of January 1, 2025, for service providers to update their systems.
UPI Circle: The latest addition to the UPI suite, UPI Circle extends the UPI functionality to both the primary user (account holder) and other individuals (secondary users) whom the primary user wants to include under the same UPI setup. While the primary user needs a bank account linked with UPI, secondary users do not require one. This feature allows the designation of up to five secondary users to manage payments on behalf of the primary user. NPCI sets a per-day transaction limit of Rs 15,000, with no single transaction exceeding Rs 5000. It is beneficial for scenarios such as parents allowing adult children to handle spending while monitoring expenses or assisting the elderly by handling payments on their behalf. The primary user can set individual transaction limits for each secondary user and opt for transaction approval requests for enhanced control.
These various UPI offerings have revolutionized India’s digital payment landscape by removing barriers such as inadequate network coverage and limitations due to lack of smartphones or technological experience, encouraging innovation among fintechs and banks alike. By continually evolving and providing tailored solutions through these variants, UPI’s reach is undeniably expanding, further strengthening instant payment adoption and promoting a cashless economy.
