RBI Allows UPI Payments via Third-Party Apps for PPI Holders

The Reserve Bank of India (RBI) has announced that holders of full-KYC prepaid payment instruments (PPIs) such as digital wallets, gift cards, and metro rail cards can now make and receive Unified Payments Interface (UPI) payments through third-party applications like Google Pay and PhonePe. This move aligns with RBI’s Payments Vision 2025, promoting seamless payment interoperability and enhancing digital payment adoption. Previously, UPI payments involving PPIs were restricted to the issuer’s mobile application.

Enhancing Interoperability with UPI

The RBI’s decision allows PPI issuers to link their customers’ fully-KYC-compliant PPIs to UPI handles. UPI payments will now be authenticated using the customer’s existing PPI credentials, ensuring a pre-approved process before transactions reach the UPI system. This eliminates the reliance on issuer-specific platforms and integrates PPIs with mainstream UPI apps for greater flexibility and convenience.

Key Impacts of the Directive

Improved User Experience: The integration will simplify transactions such as online shopping, bill payments, and fund transfers, offering a smoother and more convenient experience.

Addressing Limitations: The directive resolves compatibility issues between PPIs and mainstream payment platforms, making PPIs more versatile for everyday transactions.

Encouraging Digital Payment Growth: By expanding UPI’s accessibility, the RBI aims to drive wider adoption of digital payments across various sectors.

Past Context and Future Implications

Previously, UPI payments were limited to bank accounts or PPI issuers’ applications, restricting user flexibility. This change marks a significant step towards achieving a unified digital payment ecosystem, reducing dependency on specific platforms. It paves the way for a more inclusive financial system in India, benefiting both customers and businesses.

Summary of the news