The Unified Payments Interface (UPI) is an Indian instant payment system and protocol, a type of real-time digital payment system developed by the National Payments Corporation of India (NPCI). The system was created to solve the problem of complex banking systems like NEFT and RTGS and to encourage cashless transactions by making digital payments simple and accessible. The pilot launch took place on April 11, 2016, with 21 member banks, and was inaugurated by the then Governor of the Reserve Bank of India (RBI), Dr. Raghuram G. Rajan.
UPI works by allowing users to link multiple bank accounts to a single mobile application and transfer funds instantly between two bank accounts using only a unique Virtual Payment Address (VPA) or UPI ID. This mechanism eliminates the need to share sensitive bank account numbers or IFSC codes. The transaction flow involves the payer initiating a payment, entering their UPI PIN for authorization, and the NPCI's central switch routing the request to the recipient's bank for instant settlement. UPI runs as an open-source Application Programming Interface (API) on top of the Immediate Payment Service (IMPS) and is regulated by the RBI.
The system is closely connected to the NPCI, which is the umbrella organization for all retail payments in India, established in 2008 by the RBI and the Indian Banks' Association (IBA). The legal framework for the payment system is rooted in the Payment and Settlement Systems Act, 2007.
Recently, the NPCI introduced new operational guidelines from August 2025 to improve system resilience and reduce server load. Key changes include limiting the number of bank balance checks to 50 times per day per UPI app and restricting scheduled AutoPay mandates for recurring payments to non-peak hours. The daily monetary cap for existing users remains ₹1 lakh, though the RBI has enhanced the limit to ₹5 lakh for specific categories like healthcare and education. Furthermore, the UPI framework has been expanded with features like UPI 2.0 in August 2018, which enabled linking overdraft accounts, and the introduction of Credit Line on UPI in 2024.