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65. Payments Digest — VI

What is the connection between an Act that was written in the year 1881 and UPI… (Read update №3)

Let’s start with something awesome…

1. UPI123Pay…

Yeah.. RBI/NPCI launched UPI for feature phones and voice based payments… I’ve tried voice based UPI and the experience was great. Kudos to RBI/NPCI for launching this product for the masses and most importantly, for not naming it as ‘BoloPay’ or ‘MoohPay.

I will write a separate article on the working of 123Pay.

IVR (Interactive Voice Response) is not new… not even for payments… Direct OTP flow (that you see on Amazon) is part of that IVR flow for cards that is used on the website/App.

2. Token….<<extension>>… isation

Talking of cards… RBI extended deadline for tokenisation till the end of Jun’22… Although many Payment Aggregators did paid PR articles (here, here, here, here, here, here) that they are ready with tokenisation without highlighting any limitations. But the RBI knew the real status and decided to give an extension…

As they say in the payments world, “‘fake it… till RBI gives extension” or was it “fake it till you make it”?… No idea!

3. UPI Autopay <> Safety net for merchants

UPI AutoPay has many drawbacks/limitations (Covered in this Article). And one of the limitations was that there was no remedy to the lender (e.g. NBFC) if the Autopay debit was not honoured if the borrower didn’t have sufficient funds.

As per NPCI’s Nov’21 circular, UPI AutoPay will be covered under Section 25 of Payment and Settlement Act, 2007 and the lender can seek remedy (in case of debit failure of UPI AutoPay) that is available in case of cheque bounce case under Chapter 18 of Negotiable Payment Instrument Act, 1881. (Yeah… you read it correctly… 1881)

The only condition is that the transactions should be processed via MCC (merchant category code) 7322 (for loan repayment and EMI collection).

If you are a lending category merchant then make sure that your acquiring bank or Payment Aggregator has configured 7322 MCC and is not running on the Master MID with a generic MCC.

4. What Goes around Comes Around (Aadhar OTP is back)

eNACH (refer this article) enables users to set a recurring mandate on bank a/c (covered in this article).

Refresher Course: Mandate has 2 important stages (let’s skip other steps)

  • Mandate Registration: User has to validate that account belongs to her/him
  • Mandate debit: Merchant runs mandate to debit user’s account

At present, there were only two ways to validate a mandate: (a) complete a net-banking transaction (b) complete a debit card transaction

NPCI has revived the Aadhar OTP validation for validating/registering eNACH mandate (FYI: eNACH started with Aadhar OTP but then it was stopped).

Registration Flow:

Only the registration stage flow will change and other stages of life cycle (debit, cancellation etc.) will remain as is.

5. UPI Transaction Limit

What is the transaction limit for UPI? Answer: Rs.1lakh (per day)

It is correct and incorrect at the same time (like Schrodinger’s cat — dead and alive at the same time).

  • It is 1 lakh per transfer but customer’s banks have their own limits (based on risk) (Refer here)
  • NPCI circular standardised the limits (I am not sure whether all banks implemented it or not).
  • For the investment sector (for IPO and Government Securities) the limit is increased from earlier 2lakh to Rs.5 Lakh.

6. Other updates

a. RBI also launched a 24x7 helpline called DigiSaathi to queries related to digital payments across products.

b. RBI cancelled the PPI licence of Muthoot Vehicle and Asset Finance Ltd and Eko India Financial Services Pvt. Ltd. and also warned customers about using services of unauthorised payments entities. (FYI: List of licensed entities).

Talking of ‘licence’ — where are we with PA/PG Licence? It is interesting to know who will get it and what happens to the one who gets rejected. (Read this article to know more about PA/PG Licence)

c. MDR and Level playing: As you know GOI/RBI prohibits payment companies from charging MDR (merchant discount rate) on UPI/Rupay (They can call it by any other name but not MDR… funny… and Shakespeare thought ‘what’s in the name’).

For years (since 2020), payment providers have been insisting on bringing back MDR (officially) whereas RBI is thinking of capping other payment modes (credit card, wallet etc.) to create a level playing field. (It doesn’t make sense at all but happy to hear your views)

d. Finance Bill: GOI classified crypto currencies as ‘Virtual Digital Assets’ and not currency / legal tender. Also, has brought taxation on Cryptocurrencies. So, did this bill legalise crypto? Is industry out of the woods? No, not yet… the Finance Bill raises more questions than answers but overall this is a positive development. Also, the finance bill paved the way for RBI’s own digital currency. Way to go!

e. Approved: Basis RBI approval, Airtel Payments Bank is now a Scheduled Bank… What is the difference (Read here) [On a separate, unnecessary and totally useless note… after a decade long relationship with Vodafone, I switched to Airtel]

f. Stopped: RBI has stopped PayTM payments bank from onboarding new customers and will conduct an IT audit (there is possibility of data being stored on Chinese servers and gaps in following KYC norms).

PayTM shouldn’t feel sad about it as in the past the RBI had put a stop on Amex, MasterCard and even HDFC…:)

Let’s end this article with something awesome… India is now home to the 3rd largest FinTech Ecosystem and RBI has set-up a FinTech Department to work closely with FinTech sector… Amazing!!!



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