Digital payments are transactions conducted through digital or online mediums, utilizing electronic methods for money exchange between the payer and the payee. In India, there is a diverse range of payment options available, including cash, credit and debit cards, UPI (Unified Payments Interface), mobile wallets, NEFT (National Electronic Funds Transfer), RTGS (Real Time Gross Settlement), IMPS (Immediate Payment Service).
The modern payment methods have revolutionised fund transfers, with three prominent methods, UPI (Unified Payments Interface), RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer), playing a crucial role in simplifying the process.
UPI
In India, the Unified Payments Interface (UPI) has emerged as a transformative platform in digital payments, enabling real-time transactions with high efficiency. The latest version, UPI 3.0, introduces innovative features and advancements, leading to a more dynamic, secure, and inclusive payment landscape.
UPI has emerged as the preferred choice for convenient and efficient payments. It functions round the clock, including holidays, enabling quick transfers with minimal effort on your smartphone screen. Utilising UPI platforms such as Google Pay, PhonePe, and Paytm, individuals can swiftly send or receive funds in mere seconds. Be it dividing a meal tab, purchasing groceries, or covering rent payments, UPI streamlines the process with speed and ease. Additionally, the majority of UPI transactions incur no charges, further enhancing its appeal for day-to-day financial transactions.
In November, UPI transactions saw a slight decrease compared to the previous month. The total transaction volume dropped by 7% to 1,548 crore, while the overall value declined by 8% to Rs 21.55 lakh crore.
Credit lines
On Friday, the Reserve Bank of India has granted approval for small finance banks (SFBs) to provide pre-approved credit lines via the unified payments interface (UPI). Guidelines for this will be issued shortly. Previously, only scheduled commercial banks, excluding payments banks, SFBs, and regional rural banks, were allowed to offer pre-approved credit lines through UPI.
“Credit line on UPI has the potential to make available low-ticket, low-tenor products to ‘new-to-credit’ customers. SFBs leverage a high-tech, low-cost model to reach the last mile customer and can play an enabling role in expanding the reach of credit on UPI. It is, therefore, proposed to permit SFBs to extend pre-sanctioned credit lines through the UPI,” the regulator said.
"RBI has recently approved small finance banks (SFBs) to offer credit lines to customers through the UPI. This decision is aimed at increasing access to credit for individuals, particularly those in underserved or unbanked areas, while promoting digital financial inclusion. SFBs have a deep presence in rural and semi-urban areas, serving individuals and businesses that often lack access to formal credit systems. By enabling credit lines through UPI, these banks can now extend quick and easy credit to farmers, small shop owners, and daily wage earners allowing for seamless, instant borrowing," said Mohan K, Founder of TechFini.
The central bank has revised its framework for offline small-value digital payments, making significant changes to transaction limits for UPI Lite. These updates are aimed at simplifying and improving the usability of offline payments for everyday transactions.
Under the new guidelines, the maximum limit for a single UPI Lite offline transaction has been increased to Rs 1,000, up from Rs 500. Additionally, the total limit for a payment instrument has been raised to Rs 5,000 from the previous limit of Rs 2,000. These updated limits are now in effect, providing users of UPI Lite with increased flexibility in their transactions.
NEFT
NEFT (National Electronic Funds Transfer), operated and supervised by the Reserve Bank of India (RBI), is a comprehensive electronic payment system in India that facilitates seamless fund transfers among bank accounts domestically.
NEFT provides a conventional method for money transfer, ideal for larger, scheduled transactions. Unlike UPI, NEFT processes payments in batches at specific banking hours. Although it may not be as immediate as UPI, NEFT is known for its high reliability and security. With NEFT, there is no need for a smartphone; transactions can be initiated through internet banking or by visiting a local bank branch. This makes NEFT a popular choice for individuals who prefer a more traditional approach to financial transactions and may not be tech-savvy or require formal documentation.
RTGS
RTGS, or Real Time Gross Settlement, is a system in which funds transfer instructions are processed upon receipt in real time. Furthermore, settlement of funds transfer instructions is executed individually on an instruction-by-instruction basis.
Difference between UPI, RTGS and NEFT
| Key features | UPI | NEFT | RTGS |
| Speed | Instant | Processed in batches | Faster, instant transfers |
| Availability | 24/7, including holidays | Banking hours | Available 24x7x365 |
| Device/medium | Smartphone with internet | Internet banking or bank branch access | Can be done both, online and offline ways |
| Transaction Limit | Rs 1 lakh, varies from bank to bank | No upper limit, depends on banks | A minimum limit of Rs 2 lakh |
| Charges | Mostly free | Minimal charges may apply |
Rs 24.50 + GST for transactions between Rs 2-5 lakh Rs 49.50 + GST for transactions above Rs 5 lakh |
| Usage | Quick, small payments | Large, planned transfers | Interbank transfers and large business payments |