As of 2024, UPI carried about 49% of the world’s real-time payment volume. That is an IMF figure cited by the Government. A phone scan at a tea stall now rides on rails built by one organisation. That organisation is the National Payments Corporation of India (NPCI).
This lesson explains who NPCI is and what UPI does. It then follows UPI’s growth, its spread abroad and the 2026 rule changes. It ends with traps that exam setters like.
What are NPCI and UPI?
Who runs UPI, and who set it up?
NPCI was set up in December 2008. The RBI and the Indian Banks’ Association guided its creation. It is the umbrella organisation for retail payments and settlement systems in India. It is owned and operated by the banks.
The Payment and Settlement Systems Act, 2007 gives the legal base. The RBI authorises NPCI to run payment systems. The RBI also regulates and oversees them.
The Unified Payments Interface (UPI) is one of those systems. NPCI launched it on 11 April 2016 under RBI oversight. It started as a pilot with 21 member banks.
UPI lets you pay straight from one bank account to another. You use a UPI ID, a mobile number or a QR code. No card is needed.
Note that NPCI’s founding year and UPI’s launch year are different. NPCI came in 2008. UPI came eight years later.
Sources: RBI speech on NPCI · RBI Bulletin on payments · PIB, April 2026 UPI note.
Check 1
NPCI is a department of the Government of India.
What else does NPCI run besides UPI?
NPCI operates several payment systems for the RBI. The National Financial Switch (NFS) links ATMs. The Immediate Payment System (IMPS) moves money instantly. The Aadhaar Enabled Payments System (AEPS) lets people bank using Aadhaar.
NPCI also runs the National Automatic Clearing House (ACH). It handles the Cheque Truncation System too. Each system solves a different payment problem.
RuPay is NPCI’s card scheme. NPCI affiliates RuPay debit and prepaid cards issued by banks. It also affiliates co-branded credit cards from approved entities.
These systems also support financial inclusion. A person who opens a bank account under the JAM idea can then use UPI. Our JAM Trinity article explains that link.
NPCI International Payments Limited (NIPL) is a wholly owned subsidiary. It was incorporated in April 2020. Its job is to take UPI and RuPay to other countries.
Sources: PIB, NPCI and payment systems · PIB, July 2026 UPI release · JAM Trinity article.
- RBI and IBAGuided NPCI’s creation in December 2008.
- NPCIRuns NFS, IMPS, AEPS, ACH and RuPay.
- UPILaunched on 11 April 2016.
- NIPLTakes UPI and RuPay abroad since April 2020.
How big has UPI become?
What do the numbers say as of July 2026?
As of July 2026, 741 banks were live on UPI. UPI processed 2,365.8 crore transactions that month. Their total value was ₹29.87 lakh crore.
Over a full year, the growth is even clearer. In FY 2025-26, UPI handled over 24,162 crore transactions. Their value was about ₹314 lakh crore.
Compare that with FY 2016-17. Volume then was about 2 crore transactions. That is roughly a 12,000-fold rise. Value grew more than 4,000-fold.
As of June 2026, 55.49 crore users were onboarded on UPI. For FY 2025-26, UPI’s share of India’s digital payments was 85%.
The month figures change often. Use the date attached to each number when you revise.
Sources: PIB, August 2026 UPI backgrounder · PIB, July 2026 UPI release · PIB, April 2026 UPI note.
Check 2
In FY 2025-26, UPI handled about ₹314 lakh crore in annual value.
Why did UPI spread so quickly?
UPI is open to many banks. One app can link several accounts. A payment moves in seconds. Those features made it easy to adopt.
Major events pushed it further. On 8 November 2016, the Government cancelled the legal tender status of ₹500 and ₹1000 notes. People queued at banks for new cash. Many then tried digital payments. The BHIM app launched in December 2016.
UPI 2.0 arrived in 2018. UPI crossed one billion transactions in a month in October 2019.
Later additions widened the reach. UPI AutoPay handled recurring payments. UPI Lite made small payments PIN-less. 123PAY brought feature-phone users in. UPI Circle let a primary user authorise secondary users.
Demonetisation did not create UPI. UPI launched months earlier. The cash shortage simply gave people a reason to try it.
Sources: PIB, 8 November 2016 notice · PIB, August 2026 UPI backgrounder · PIB, April 2026 UPI note.
Check 3
UPI was launched after demonetisation in November 2016.
How did UPI’s first decade unfold?
The decade has clear milestones. UPI began in April 2016 with 21 banks. BHIM followed in December 2016. UPI 2.0 came in 2018. One billion monthly transactions came in October 2019.
UPI also moved abroad. Its earliest overseas launch was in Bhutan. A news report says two-way UPI-based connectivity between India and Bhutan has been enabled.
In February 2023, the Prime Ministers of India and Singapore witnessed a launch. It linked UPI with Singapore’s PayNow. Users can send money using a UPI ID, a mobile number or a virtual payment address.
The RBI Governor and the head of Singapore’s central bank made the token transactions. The link joins two fast payment systems. It does not merge the two systems.
Sources: PIB, August 2026 UPI backgrounder · RBI, UPI-PayNow release · Akashvani, India–Bhutan UPI link.
Where does UPI work abroad as of August 2026?
As of the August 2026 PIB backgrounder, UPI is live in 11 foreign countries. The list covers acceptance or cross-border remittances. It includes Bhutan, Nepal, Singapore, the UAE, France, Sri Lanka, Mauritius and Qatar.
Three newer additions followed in 2026. In June 2026, NIPL and ACLEDA Bank launched UPI acceptance in Cambodia. The route uses Cambodia’s KHQR code. Indian travellers can pay at over 4.5 million Cambodian merchants.
Also in June 2026, UPI went live in Greece for remittances, through Eurobank. On 30 July 2026, the Maldives system Favara linked with UPI for remittances.
Notice the two types of link. Acceptance lets a traveller pay a merchant abroad. Remittance sends money to an account.
Sources: PIB, August 2026 UPI backgrounder · PIB, June 2026 Cambodia release · PIB, July 2026 UPI release.
Check 4
UPI works abroad only as a merchant-payment tool, never for sending money.
How did UPI add new features?
What do UPI AutoPay, Lite, 123PAY and Credit Line do?
UPI AutoPay handles recurring e-mandates. It covers subscriptions, utility bills, insurance premiums, SIPs and EMIs.
UPI 123PAY serves feature-phone users. It was launched on 8 March 2022. It works through four routes: an IVR number, an app, a missed call and proximity sound. In 2024, its per-transaction limit rose to ₹10,000.
UPI Lite handles low-value payments faster and without a PIN. In 2024, its wallet limit rose to ₹5,000. The per-transaction limit rose to ₹1,000.
Credit Line on UPI came in 2023. It lets a bank link a pre-sanctioned credit line as a funding account.
A simple memory hook helps here. 123PAY is for feature phones. Lite is for small, PIN-less payments. Credit Line is for borrowed money.
Sources: PIB factsheet, UPI: Transforming India’s Payment Landscape · PIB, UPI123Pay release, March 2022.
How did UPI add shared access, higher limits and easier sign-in?
UPI Circle arrived in 2024. A primary user can authorise secondary users. Each secondary user gets a predefined limit on the primary user’s bank account.
In 2024, the RBI raised the UPI limit for tax payments from ₹1 lakh to ₹5 lakh per transaction. Higher limits also apply to capital markets, IPO subscriptions, loan collections, insurance, healthcare and education.
In 2025, on-device authentication let users pay with a phone fingerprint or face unlock. Aadhaar-based face authentication made UPI PIN setup easier. It helps first-time users, senior citizens and people without easy access to cards.
Sources: PIB factsheet, UPI: Transforming India’s Payment Landscape.
How does the UPI–Nepal link work?
India and Nepal launched a person-to-person remittance link on 6 June 2026. It joins India’s UPI with Nepal’s National Payments Interface (NPI). Users send money in real time from their mobile banking apps.
Two bodies built the link. They were NIPL, the international arm of NPCI, and Nepal Clearing House Limited (NCHL). This is a remittance link between two payment systems. It differs from the older QR acceptance, which let UPI pay Nepali merchants from February 2022.
The order of early overseas links is worth remembering. Singapore came in March 2020. Bhutan followed in July 2021. The UAE and Nepal came in February 2022.
Sources: PIB, India–Nepal remittance release, June 2026 · PIB, UPI123Pay release, March 2022 · PIB factsheet, UPI: Transforming India’s Payment Landscape.
What changed in 2026?
What are the new MDR rules and features?
Merchant Discount Rate (MDR) is a fee on certain merchant payments. The Government stated that MDR is neither a tax nor a charge collected by the Government or NPCI. Banks and payment providers share it.
The September 2026 framework keeps person-to-person payments free. Payments to merchants up to ₹2,000 stay free. A nominal 0.4% MDR applies only to merchant payments above ₹2,000. It is capped at ₹300 for payments of ₹75,000 and above. Essential sectors such as railways pay a flat ₹5.
The start date has moved. NPCI said MDR on select merchant payments will start “immediately post Diwali” on a date to be notified. Treat that date as not yet fixed.
NPCI also announced new features at GFF 2026. Tap & Pay lets you unlock an NFC phone and tap a terminal. UPI payments can be PIN-less up to ₹5,000 there. MyUPI is an AI-powered help platform built on NPCI’s small language model, FiMI.
Sources: PIB, September 2026 MDR note · Khaleej Times, MDR deferral · NPCI, GFF 2026 release.
Check 5
Under the new MDR rule, a person sending money to a friend pays 0.4%.
What traps do exam setters use here?
Traps worth knowing before your exam
UPSC CSP 2025 listed five countries and asked how many accept UPI merchant payments, other than India. Only three did at the exam’s cutoff. They were the UAE, France and Singapore. Germany and Bangladesh were the traps.
Set-makers like a plausible country that is not yet live. Always check the date of the list.
UPSC CSP 2018 asked which body links all of India’s ATMs. The answer is NPCI, through the National Financial Switch. The same paper tested Merchant Discount Rate. It also tested whether a chip-pin debit card carries four authentication factors. It does not.
UPSC CSP 2019 tested the RBI’s payment-data rule. Only storing the data in India is real. Public-sector-only ownership and CAG audit oversight are not part of it.
Sources: UPSC CSP 2025 paper · UPSC CSP 2018 paper · UPSC CSP 2019 paper.
MCQ on NPCI and UPI
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