Relevance: GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment, Inclusive growth and issues arising from it.
Key Phrases: National Payments Commission of India, UPI, AutoPay, indigenous digital payment, QR code-based payment, IVR-based technology, NEFT, RTGS.
Why in News?
- The National Payments Commission of India (NPCI) has created a new UPI service called UPI Lite to assist users and make their transactions less time consuming.
What is UPI Lite?
- UPI Lite is a one-device wallet similar to those found on Paytm, Freecharge, Mobikwik, and other popular digital payment apps.
- The functionality will enable you to make near-real-time small-value payments using money stored in your wallet without the need for an internet connection.
- Given that about 75 per cent of the total volume of retail transactions in India (including cash transactions) are below ₹100 each and 50 per cent of UPI transactions are for ₹200 each, UPI Lite will initially target transactions of ₹200 or less.
- To begin with, the app will be designed only for debit transactions that is, to send money from the app. The facility for credit transactions or receiving money through the app is planned in Phase-2.
Unified Payment Interface (UPI)
- UPI is the indigenous digital payment system in India that was conceptualised and operated by the National Payments Corporation of India.
- The objective to integrate all the payment mechanisms available in the country and make them uniform for retail payments.
- Seven years on, UPI today holds 96.5 per cent market share in overall mobile payments and 56 per cent (volume-wise) in person-to-merchant payments.
- As of February 2022, there are 304 banks available on UPI with a monthly volume of 452 crore (4.52 billion) transactions and a value of ₹8.26 lakh crore (US$110 billion).
How does it work?
- UPI Lite is an ‘on-device wallet’. Here, users will have to allocate funds from their bank accounts to the app and the amount will be parked in the user’s bank in an escrow or pool or designated account for the app.
- The UPI Lite balance limit is set at ₹2,000.While payments are possible in an offline mode, you would need internet connectivity to replenish funds using an additional factor authentication (AFA) or through UPI AutoPay, which needs to be registered online using an AFA.
- The upper limit for payment is currently ₹200.The key differentiating factor between a regular digital wallet and UPI Lite is that an existing UPI customer need not repeat the KYC process to use UPI Lite.
Will UPI Lite be different from UPI 123Pay?
- Yes. Unlike UPI 123Pay, UPI Lite enables QR code-based payment even offline.
- UPI 123Pay is largely an interactive voice response or IVR-based technology, though it also has app-based functionality, proximity-sound based payments and enabling payments through a missed call.
Why is UPI Lite important for digital payments in India?
- Large Number of Transaction
- Processing over ₹9.6 lakh crore worth of transactions as on March 31, 2022, the prominence of UPI within the traditional payments system such as IMPS (Immediate Payment Service), NEFT (National Electronic Funds Transfer) and RTGS (Real Time Gross Settlement) has grown significantly in the last three years.
- Low Value Payments
- The ticket sizes in UPI are much smaller than in the other channels. About three-fourths of UPI payments are low-value.
- Help in Declutting the payment system
- Recently, UPI faced payment glitches, with the rate of rejection higher than usual due to the transaction load.
- By taking low-value transactions offline, UPI Lite will help declutter the payments system.
- Impact on Banks
- A reduced traffic on the payments platform means an increased availability of core banking system or CBS for big-ticket payments through NEFT and RTGS.
- Therefore, UPI Lite would help banks process payments more cost-effectively.
Note:-
- IMPS (Immediate Payment Service): IMPS provides robust & real time fund transfer which offers an instant, 24X7, interbank electronic fund transfer service that could be accessed on multiple channels like Mobile, Internet, ATM, SMS.
- NEFT (National Electronic Funds Transfer): The National Electronic Funds Transfer (NEFT) is an electronic payment system that facilitates direct one-to-one payments across the country.
- RTGS (Real Time Gross Settlement): The term real-time gross settlement (RTGS) refers to a funds transfer system that allows for the instantaneous transfer of money and/or securities.
Conclusion
- As a way to encourage small-ticket digital payments without burdening technology infrastructure of banks UPI lite will be a game changer making the transactions more easy and fast.
Source: The Hindu BL
Mains Question:
Q. What is UPI lite? Why is it important for digital payments in India? (150 words).
