Both in terms of transaction volume and value, the Unified Payments Interface (UPI) set yet another record high in August. On a month-over-month (MoM) basis, there were 6.57 billion transactions totaling Rs10.72 trillion, an increase of 4.62 % and 0.95 %, respectively. The National Payments Corporation of India (NPCI) reported that the value of transactions increased by 67.85% while the volume increased by 85% year over year (YoY).
UPI's volume levels surpassed 6 billion for the first time since the company's founding in 2016 last month. UPI facilitated over 45 billion transactions totaling Rs 77.94 trillion in 2022. Additionally, UPI has recorded over 30 billion transactions totaling Rs51.74 trillion in FY23 (as of August). This represents roughly 65% of the transactions recorded for the whole FY22. Additionally, UPI transactions in the first five months of FY23 are about 1.35 times higher than those reported in FY21.
In FY22, UPI processed more than 46 billion transactions totaling more than Rs84.17 trillion, exceeding the $1 trillion mark. In FY21, it also handled 22.28 billion transactions totaling Rs41.03 trillion. As a result, both the volume and the dollar amount of transactions surged over the course of a year, illustrating the nation's quick adoption of digital payments, particularly UPI.
Digital payments have become more widely used as a result of the Covid-19 epidemic. With the exception of a few hiccups during the first two waves of the pandemic, UPI transactions have been rising along with the greater economy's recovery. The Reserve Bank of India's (RBI) digital payment index has increased from 207.94 in March 2020 to 349.30 in March 2022, reflecting this. This indicator shows how far the nation's payments have been digitalized.
The next step for UPI is to handle one billion transactions daily during the next three to five years. In a recent discussion paper, the RBI sought opinions from interested parties on whether fees should be applied to UPI transactions. The RBI has asked whether the merchant discount rate (MDR) should be imposed based on the transaction amount or if a flat sum should be levied regardless of the transaction value if UPI transactions are charged.
Additionally, it has asked for input on whether the RBI should decide on the fees or if the market should have the authority to decide if fees are implemented at all. The RBI also requested input from interested parties about the potential imposition of a "tiered" tax on UPI payments based on various amount bands. The government responded by restating that UPI is a public good and that no fees will be assessed for its services.
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