Digital Economy: RBI to Launch UPI-Based Product That Does Not Need Internet For Payments: What It Means in India’s Quest for Financial Inclusion


Representative image. | Photo credit: PTI

Highlights

  • India’s quest to transition to a cashless economy is fraught with monumental challenges, some of which, according to the Reserve Bank of India, can be solved by expanding the UPI to include phone users.
  • India’s diverse topology poses serious challenges for internet service providers and for millions of Indians internet connectivity remains a scarce commodity
  • India’s membership of the UPI has transformed the country into one of the fastest growing financial economies in the world. But the latest RBI announcement is recognition that this transformation is still far from over

It is no exaggeration to call India’s Unified Payment Interface (UPI) one of the most significant financial innovations since the country’s independence. Indians were first introduced into the payments system about a decade ago, but it was really in 2016 when the country was going through the demonetization exercise that it really established itself as an alternative. legitimate to conventional banking and transaction methods.

And with the advent of a pandemic, UPI has continued to prove itself. According to data compiled by the National Payments Corporation of India (NPCI), which acts as the administrator of the UPI, the number of UPI-based transactions and their value tripled during the fiscal year. previous (2020-2021).

In March 2021, the total UPI transaction volume skyrocketed to 2,732, valued at Rs 5.04,886 crore. As a perspective, the total transaction volume and value in April 2020 stood at 999.6 respectively. million and 1 51 141 rupees. During the same period, the number of banks adopting UPI also increased from 153 to 216.

India’s progress in mobile penetration has been directly responsible for the growing adoption of UPI. According to an October report from TRAI, India now has 118 million mobile users. However, although the Jan Dhan program has also facilitated greater financial inclusion in the country, the number of bank accounts – around 582 million – is still significantly lower than the number of cellphone users.

India’s quest to transition to a cashless economy is fraught with monumental challenges, some of which, according to the Reserve Bank of India, can be solved by expanding the UPI to include phone users. On December 7, the central bank revealed that it would soon launch a UPI-based payment product for users of multifunction phones to make retail payments, thereby eliminating the need for an internet connection.

India’s varied topology poses serious challenges for Internet service providers and for millions of Indians Internet connectivity remains a scarce commodity. The new functionality of the RBI is aimed at these people and will allow them to transact transparently even if they do not have access to the internet.

“In order to further deepen and make digital payments more inclusive, facilitate transactions for consumers, facilitate greater participation of retail customers in various segments of financial markets and strengthen the capacity of service providers, it is proposed to (i) launch UPI- payment products based on multifunction phone users, leveraging the innovative products of the RBI regulatory sandbox on retail payments; (ii) simplify the process flow for low value transactions through an “on-device” wallet mechanism in UPI applications; and (iii) increase the transaction limit for payments via UPI for the Retail Direct Scheme for investment in G-secs and Initial Public Offering (IPO) applications from Rs 2 lakh to Rs 5 lakh ”, declared the governor of the RBI Shaktikanta Das.

India’s membership of the UPI has transformed the country into one of the fastest growing financial economies in the world. But the latest RBI announcement is recognition that this transformation is still far from over. Enabling private Internet users to make payments in real time is a crucial step in extending financial inclusion and opening up the wide variety of financial products to large segments of the population that currently remain in the shadows.


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