Mudra Compass

Soon, users of the Unified Payments Interface (UPI) will have the option to authorize someone else to perform UPI transactions on their behalf using their bank account. This new feature, called delegated payments, was announced by Reserve Bank of India (RBI) Governor Shaktikanta Das in August as part of the bi-monthly policy update.

Before we delve deeper, let’s first understand what UPI is.

Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI) and regulated by the RBI. It enables instant money transfers between bank accounts via a single mobile application. The system operates round-the-clock, allowing users to carry out transactions instantly, without being restricted by banking hours.

When making online purchases, UPI can be selected as a payment method. The user provides their UPI ID, which triggers a payment request to their UPI application, such as BHIM. The user then enters their UPI PIN to approve the payment, ensuring that the transaction is completed instantly.

Now, let’s understand what UPI Delegated Payments is all about.

UPI Delegated Payments is a planned feature that will enable a primary user, such as a parent or employer, to authorize a secondary user, like a child or employee, to conduct UPI transactions using the primary user’s bank account. The primary user will have the ability to set specific transaction limits for the secondary user, ensuring that only the authorized amount can be spent. This feature aims to expand the reach of UPI by catering to various groups, including individuals who may not have their own bank accounts or those who need financial oversight.

Key features of UPI Delegated Payments

• The primary user retains complete control over who can access their account for UPI transactions. They have the ability to set spending limits and keep track of all activities conducted by the secondary user.
• The primary user can define a maximum transaction amount that the secondary user is allowed to spend per transaction. This feature enhances security and helps prevent any unauthorized large transactions.
• Delegated payments simplify expense management for family members or dependents, allowing them to handle finances without needing full access to the primary user’s bank account.
• While providing access to the secondary user, the primary user maintains full oversight of the transactions and can withdraw the delegated permissions whenever they choose to do so.

How UPI works

UPI operates on the Immediate Payment Service (IMPS) platform, enabling instant money transfers between any two bank accounts. Below are the steps involved in initiating a UPI transaction:

• First, the user needs to register with their payment service provider (PSP) and link their bank account to their unique UPI ID.

• To make a payment, the user selects the UPI option, enters their UPI ID, and receives a payment request through their UPI application.

• The user authorizes the transaction by entering their UPI PIN.

• The transaction is processed immediately, and both the sender and the recipient receive confirmation of the successful payment.

This facility allows a primary customer to authorize another person, known as a secondary user, to conduct transactions from the primary customer’s bank account within a specified limit. For instance, family members such as a spouse or children can make transactions on behalf of their partner or elderly parents. The secondary user does not need to have a separate bank account linked to UPI to perform these transactions. According to RBI Governor Shaktikanta Das, “This will further deepen the reach and usage of UPI digital payments.”

Additionally, the Reserve Bank of India has increased the limit for tax payments made via UPI, raising it from Rs 1 lakh to Rs 5 lakh per transaction. This change addresses the growing frequency and higher value of both direct and indirect tax payments. The hike in UPI limits for tax payments follows previous RBI decisions to raise transaction limits in sectors such as capital markets, IPO subscriptions, loan collections, insurance, and services related to medical and education.

Details regarding the implementation of these measures are still awaited. Meanwhile, in its monetary policy meeting on August 8, the committee decided to keep the repo rate steady at 6.5 percent for the ninth consecutive time.

Conclusion

The introduction of UPI Delegated Payments marks a significant advancement in India’s digital payment landscape, offering users greater flexibility and convenience. By allowing primary users to authorize secondary users to carry out transactions within predefined limits, this feature caters to a broader audience, including families and dependents who may not have their own bank accounts. This innovation, combined with the recent increase in transaction limits for tax payments, reflects the Reserve Bank of India’s commitment to expanding UPI’s capabilities across various sectors. With these enhancements, UPI is set to deepen its reach, making digital payments more accessible, secure, and versatile for users nationwide. Further details on the implementation of these measures are anticipated, alongside the RBI’s steady approach to maintaining the repo rate at 6.5 percent.