RBI Allows Payments for Non-UPI Users via Existing Accounts

Introduction to New UPI Rules

The Reserve Bank of India (RBI) has recently issued a landmark directive enabling a novel facet in Unified Payments Interface (UPI) transactions. Under the newly devised norms, existing UPI users can now authorize individuals without UPI accounts to make payments through their own accounts. This ground breaking move aims to expand the accessibility and utility of the UPI system, which has already revolutionized digital payments in India.

Historically, UPI transactions have been restricted to account holders who have registered with a UPI service. This new mandate opens a new avenue, addressing an erstwhile limitation. Now, individuals without UPI accounts can utilize the UPI services of registered users to make their transactions. The RBI's decision is poised to benefit a wide range of demographics, particularly those who may lack the technological proficiency or resources to create their personal UPI accounts.

"Delegated Payments would allow an individual (primary user) to set a UPI transaction limit for another individual (secondary user) on the primary user’s bank account. This product is expected to add to the reach and usage of digital payments across the country. Detailed instructions will be issued shortly," the central bank said in its monetary policy decision. facilitate this, existing UPI users will have a mode through which they can authorize a transaction on behalf of a non-registered individual. This will likely involve steps ensuring compliance with security protocols and fraud prevention measures. Authorized transactions will continue to be logged and tracked within the system, maintaining transparency and accountability. The authorization process is assumed to include user consent agreements and verification steps to prevent misuse.

"Allowing Delegated Payments can be a pivotal step in expanding the userbase of Unified Payments Interface (UPI). Through this development, two family members can now use one bank account for making UPI payments. While we wait for more details, this initiative will further strengthen and enhance UPI payments especially in rural areas, where financial literacy is less, and one bank account is used by one family. This mechanism will enhance user convenience by ensuring effective control through the usage limit authorization feature. This will also empower consumer confidence with easy, safe, and hassle-free financial transactions, thereby contributing towards a digitally empowered nation," said Rahul Jain – CFO, NTT DATA Payment Services India.

In July, the Unified Payments Interface (UPI) witnessed a significant 45% annual growth in payments, as per data from the National Payments Corporation of India (NPCI). The total value of transactions also experienced a notable increase of over 35%, reaching a total of Rs 20.64 lakh crore. This milestone represents the third consecutive month in which the total transactions surpassed Rs 20 lakh crore. Notably, in June 2024, the total value of UPI transactions stood at Rs 20.07 lakh crore, whereas in May it was recorded at Rs 20.44 lakh crore.

In July 2024, according to NPCI data, the average daily transaction value through UPI was Rs 466 million, approximately amounting to Rs 66,590 crore. The volume of UPI transactions increased by 3.95% in July compared to June, and the value of transactions grew by 2.84%. Within the first four months of the current fiscal year (2024-25), UPI registered transactions totaling Rs 80.79 lakh crore through approximately 55.66 billion transactions.

In FY2023-24, the total number of UPI transactions reached 131 billion, reflecting a significant surge from the 84 billion transactions recorded in the previous fiscal year of 2022-23. The Reserve Bank of India's monthly bulletin highlighted a remarkable ten-fold growth trajectory in UPI transactions over the past four years. Starting at 12.5 billion transactions in 2019-20, the volume soared to 131 billion transactions in 2023-24, constituting a substantial 80% share of the total digital payment volumes. Notably, UPI transactions exhibited robust expansion, registering a notable 57% year-on-year increase in FY24.

By allowing existing UPI users to authorize payments for non-UPI account holders, the RBI has taken a significant step in furthering financial inclusion and ensuring a more inclusive digital economy. This move has the potential to widen the user base significantly, stepping up UPI’s role as an enabler of economic activities, even for those in rural or underserved areas. Moreover, this initiative can spur local businesses by making them accessible to a broader spectrum of customers who may rely on intermediaries to complete UPI transactions.

The RBI’s directive marks a progressive stride in the digital payment ecosystem. The prospect of existing UPI users assisting those without accounts in conducting transactions could pave the way for broader financial inclusivity and digital engagement. As we await the specific operational guidelines and security protocols to be detailed, the anticipation of a more democratized payment system holds great promise for India’s economic and digital future.