India Expands UPI to Include More Rural, DBT Users

May 15, 2024

Multiple banks, including the Reserve Bank of India, are actively urging people who receive government-direct benefit transfers (DBTs) to use the Unified Payments Interface (UPI) for their transactions. This program is part of a larger plan to get more people to use digital payments instead of cash. A lot of people in rural areas are getting direct benefits from DBT plans because the National Payments Corporation of India (NPCI), which runs UPI, is adding district and rural cooperative banks to its platform so that rural customers can use digital payment services.

Current Challenges and Opportunities

Even though 300 million people use UPI, the 960 million people in India who use debit cards show that there is a much bigger, open market. This difference shows that digital payments have a lot of room to grow across the country. At the moment, UPI handles more than 13 billion transfers every month, most of which happen in cities and parts of cities. The goal is to use this approach all over rural India so that everyone has access to money.

Implementation by Local Banks and Technology Providers

Local and regional cooperative banks have only been able to give out debit cards in the past. They need extra government approval to offer mobile banking services, such as UPI. Sarvatra Technologies and other organizations like it are very important to this shift because they help banks get around regulatory hurdles and implement new technology. Around 242 local banks have started using UPI, and work is still being done to add more. With QR codes, these banks are starting to work with rural merchants, which will encourage rural customers to make digital purchases at common places of sale like grocery shops and farm supply stores.

Barriers to Rural Adoption of Digital Payments

One big problem is that users are taking out their DBT funds right away; over 40% of the funds that were transferred are being taken out right away. The main goal is to keep a digital money trail, but this behavior gets in the way of that. Also, the fact that many older citizens in rural areas still use old-fashioned feature phones makes it harder for them to use more advanced UPI apps made for smartphones. There is UPI123 for feature phones, but it isn’t used as much as UPI systems for smartphones.

More About Unified Payments Interface (UPI)

The Unified Payments Interface (UPI), which was created by the National Payments Corporation of India (NPCI) in 2016, changed the way digital transfers are made in India. Some of the features are given below:

Ease of Use: UPI lets people quickly send money between different bank accounts using only their phones, and it works 24 hours a day, seven days a week.
Flexible Transactions: Allows “Peer to Merchant” (P2M) transfers, which make it easy to pay by reading a QR code.
Better security: It uses a Virtual Payment Address (VPA) to hide users’ bank information during transfers, which makes it safer.
Widespread Use: By 2021, UPI had been connected to 224 banks and handled more than 2 billion transactions per month, showing how quickly it was accepted and liked in India.

More About Direct Benefit Transfer (DBT) schemes

When India started its Direct Benefit Transfer (DBT) programs in 2013, the goal was to get benefits directly into people’s bank accounts. This would make sure that the programs worked well by reducing waste and delays. By March 2020, DBT had given more than $200 billion to people who needed it through 400 different projects. Notably, the PAHAL plan under DBT changed how LPG cylinders were distributed and helped more than 263 million people. The system was also the first to integrate payments tied to Aadhaar, which helped people learn how to use technology.

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