NPCI launches new-look UPI with overdraft facility

If Unified Payments Interface revolutionised the peer-to-peer digital payments ecosystem in the country, National Payments Corporation of India has now launched an updated version of the payment railroad, mainly to drive merchant payments on UPI.

The updated UPI, commonly referred to as UPI 2.0, was launched on Thursday by the Reserve Bank of India governor Urjit Patel along with State Bank chairman Rajnish Kumar and Infosys non-executive chairman Nandan Nilekani. ET had written in its July 31 edition that UPI was set to be launched in the second half of August with a few limited features with around 10 banks.

Banks like SBI, ICICI Bank, Axis Bank, HDFC Bank, Yes Bank are the first batch of lenders to be going live on UPI 2.0. With features such as overdraft facility on UPI, block payments for purchasing stocks during IPO, or bringing in a signed intent, UPI is set to introduce new features, mainly to ease merchant payments on the platform. Commenting on the progressive role played by the central bank in the entire UPI journey, Nilekani said: “The RBI has played a phenomenal role in the evolution of the payment mechanism. Also, having a company like NPCI is very critical because unlike other countries we have done a great job in keeping the payment railroad open, thereby not creating a duopoly and monopoly.”

Nilekani also touched upon the role of the central bank in spearheading the account aggregation guidelines. In the context of the strong growth seen by the platform over the past two years, Nilekani said with UPI clocking around 250 million transactions per month already, it should clock a billion transactions per month within a year.

“Large number of banks, merchants, third-party players and consumers trusted this platform which resulted in substantial growth in terms of volume and value of transactions since its inception. With the launch of UPI 2.0, we hope to touch new milestones by expanding UPI’s presence, especially in person-to-merchant payment space,” said Dilip Asbe, chief executive officer, NPCI.

UPI 2.0 was announced by the previous managing director of NPCI AP Hota way back in 2016, saying the intent was to launch the update in 2017, but it took a long time for the tech platform to be developed and stabilised, especially with explicit permissions required from the central bank. One of the biggest misses for UPI 2.0 was the feature of recurring payments which could have driven transactions for use cases such as mutual fund payments, loan repayments, etc. While few features have been missed, the industry is gearing up for a whole set of new features on UPI after the update.

“The linking of overdraft will help the flow of credit with ease based on transaction history, and combined with one-time mandate can throw up many innovative use cases (on UPI),” said Akhil Handa, head of fintech and new business initiatives at Bank of Baroda.