Paying a vegetable seller by scanning a QR code has become normal in India. This is possible because of UPI, built by the National Payments Corporation of India (NPCI). India now has one of the largest digital payment systems in the world. Exams ask about NPCI, UPI, RuPay, BHIM and newer features like UPI Lite and UPI 123PAY. This post explains them in simple words. It ends with 15 previous year questions.
Key Points (Quick Revision)
- NPCI was set up in 2008 by the RBI and the Indian Banks' Association to run retail payment systems.
- UPI (Unified Payments Interface) was launched in 2016.
- RuPay is India's own card network; BHIM is NPCI's UPI app, launched in December 2016.
- UPI 123PAY lets feature phone users pay; UPI Lite is for small, quick payments.
- Payment systems are governed by the Payment and Settlement Systems Act, 2007.
1. The National Payments Corporation of India
- NPCI was set up in 2008 as an umbrella body for retail payments, promoted by the RBI and the Indian Banks' Association.
- It is a not-for-profit company, owned by a group of banks.
- It works under the Payment and Settlement Systems Act, 2007, which gives the RBI power to regulate payment systems.
2. Payment systems run by NPCI
| System | What it does |
|---|---|
| UPI | Instant bank-to-bank transfers using a UPI ID or QR code |
| IMPS | Instant money transfer, available 24x7 |
| RuPay | India's own card network for debit and credit cards |
| AePS | Aadhaar-enabled payments using fingerprint, useful in villages |
| NACH | Bulk payments like salaries, subsidies and EMIs |
| NETC FASTag | Electronic toll collection on highways |
| Bharat BillPay | Paying bills like electricity and water in one place |
3. How UPI works
UPI was launched in 2016. It links a person's bank account to a mobile app through a UPI ID (like name@bank).
- Money moves directly between bank accounts, instantly, 24x7.
- Payment is approved with a UPI PIN.
- Many apps - from banks and private companies - use the same UPI system, so they all work together.
- UPI payments to merchants carry no merchant discount rate for most users, which helped small shops accept digital payments.
4. New UPI features
- BHIM - NPCI's own UPI app, launched in December 2016 and named after Dr B.R. Ambedkar.
- UPI 123PAY - launched in 2022 for feature phone users, through voice calls, missed calls or app-based options.
- UPI Lite - an on-device wallet for small-value payments without entering the PIN each time.
- RuPay credit card on UPI - lets users pay through UPI using a RuPay credit card.
- UPI AutoPay - for recurring payments like subscriptions.
5. UPI goes global
Through NPCI International Payments Limited (NIPL), UPI and RuPay are being taken abroad.
- UPI has been linked with Singapore's PayNow for cross-border transfers, launched in 2023.
- Indian tourists can use UPI in several countries, including Bhutan, Nepal, the UAE, France, Sri Lanka and Mauritius, through tie-ups.
The list of countries keeps growing, so check the latest news before the exam.
6. Benefits of digital payments
- Financial inclusion - even small traders and rural users can receive payments easily.
- Less cash - lowers the cost of printing and handling notes.
- Transparency - digital records help tax collection and reduce black money.
- Direct Benefit Transfer - subsidies reach bank accounts directly.
7. Concerns
- Frauds and scams - fake payment requests, phishing and screen-sharing frauds.
- Market concentration - a few apps handle most UPI transactions; NPCI has discussed limits on market share.
- Cost of running UPI - with no merchant fee, banks and apps ask who should pay for the system.
- Digital divide - people without smartphones or internet still find it harder to use.
8. Previous year questions
- When was NPCI set up? – 2008
- Which bodies promoted NPCI? – RBI and the Indian Banks' Association
- Under which Act are payment systems regulated? – Payment and Settlement Systems Act, 2007
- When was UPI launched? – 2016
- What is India's own card network called? – RuPay
- When was the BHIM app launched? – December 2016
- BHIM is named after whom? – Dr B.R. Ambedkar
- Which UPI feature is meant for feature phone users? – UPI 123PAY
- In which year was UPI 123PAY launched? – 2022
- Which UPI feature allows small payments without a PIN each time? – UPI Lite
- Which NPCI system is used for electronic toll collection? – NETC FASTag
- What does AePS stand for? – Aadhaar-enabled Payment System
- With which country's PayNow was UPI linked in 2023? – Singapore
- Which NPCI arm takes UPI and RuPay abroad? – NPCI International Payments Limited
- Which NPCI system handles bulk payments like salaries and subsidies? – NACH
9. How to revise this topic
Start with NPCI: 2008, RBI and IBA, not-for-profit, Payment and Settlement Systems Act 2007.
Next, list the systems: UPI, IMPS, RuPay, AePS, NACH, NETC FASTag, Bharat BillPay.
Then learn the UPI timeline: UPI 2016, BHIM December 2016, UPI 123PAY 2022, UPI Lite, RuPay credit on UPI.
Finally, remember the global links: NIPL, Singapore PayNow 2023, and UPI acceptance in several countries.
10. Frequently Asked Questions
What is NPCI?
The National Payments Corporation of India, set up in 2008 by the RBI and the Indian Banks' Association, is a not-for-profit body that runs retail payment systems such as UPI, IMPS and RuPay.
When was UPI launched?
UPI, the Unified Payments Interface, was launched in 2016. It allows instant bank-to-bank transfers using a UPI ID or QR code.
What is UPI 123PAY?
UPI 123PAY, launched in 2022, lets feature phone users make UPI payments through voice calls, missed calls or simple app options.
What is UPI Lite?
UPI Lite is an on-device wallet for small-value payments, which can be made quickly without entering the UPI PIN each time.
Which law regulates payment systems in India?
Payment systems are regulated by the RBI under the Payment and Settlement Systems Act, 2007.
For more Economy topics in simple language, see our Digital Rupee and Crypto, Payments Banks and Small Finance Banks and Financial Inclusion posts, or browse the Economy section. Preparing for a bank exam? Start with the IBPS PO guide or join the 100 Hour GS Course.