UPI & Payments Infrastructure

India is the world leader in real-time digital payments, thanks to UPI. But how does it actually work? And how is it different from NEFT or RTGS?

1. UPI (Unified Payments Interface)

Launched by NPCI (National Payments Corporation of India) in 2016. It allows you to transfer money instantly using a VPA (Virtual Payment Address) like name@upi, without sharing bank details.

Key Features:

• Instant: 24x7x365.
• Interoperable: You can send from GPay to PhonePe to Paytm.
• Zero Cost: Currently, no charges for P2P (Person-to-Person) transactions.
• Limits: Usually ₹1 Lakh per day (varies by bank).

How it works (Backend):

1. Payer App (GPay) sends request to NPCI.
2. NPCI routes it to Payer's Bank.
3. Payer's Bank debits account and confirms to NPCI.
4. NPCI routes money to Payee's Bank.
5. Payee's Bank credits account. All this happens in < 3 seconds.

2. NEFT (National Electronic Funds Transfer)

• Speed: Batches (every 30 mins). Not instant.
• Limit: No limit (but banks may set limits).
• Use Case: Paying salaries, bills, or transfers where instant credit isn't urgent.
• Availability: 24x7 (since 2019).

3. RTGS (Real Time Gross Settlement)

• Speed: Instant (Real Time).
• Limit: Minimum ₹2 Lakhs. No maximum.
• Use Case: High-value business transactions.
• Availability: 24x7.

4. IMPS (Immediate Payment Service)

• Speed: Instant.
• Limit: Usually ₹5 Lakhs.
• Use Case: Instant transfers when UPI fails or for non-UPI users.
• Cost: Banks charge a small fee (₹5 - ₹15).

Comparison Table

The Future: UPI 2.0 & Credit

• UPI Lite: Wallet on device for small payments (< ₹500) without PIN. Works offline!
• Credit Line on UPI: Banks can now link pre-approved credit lines to UPI (like a Credit Card).
• International UPI: Now accepted in Singapore, UAE, France, etc.

7-Day Action Plan

Day 1: Find your "UPI ID" (VPA) in your payment app. It's not just your phone number.
Day 2: Set up UPI Lite to declutter your bank statement (small transactions won't show in passbook).
Day 3: Try an IMPS transfer using your Net Banking app (just to know how it works).
Day 4: Read about NPCI. It is a non-profit organization owned by banks.
Day 5: Check your daily UPI limit. (Most banks cap it at ₹1 Lakh or 10-20 transactions).
Day 6: Learn about MDR (Merchant Discount Rate). Who pays for the free UPI? (Govt subsidizes it).
Day 7: Teach your parents/grandparents how to use UPI safely (verify name before paying).

Quiz

💡 Final Wisdom: UPI is India's greatest export. It democratized payments. Use it, but respect the security (Never share PIN).