WHEN THE SCORECARD reads 18 billion versus half a billion, the question that looms is whether banks should continue to support the Immediate Payment Service (IMPS) or abandon it in favour of the Unified Payments Interface (UPI). As UPI establishes itself as the leader in payments, its older sibling, IMPS, is seeing its share of India’s digital payments pie shrink.

Back in 2010, when the National Payments Corporation of India (NPCI), an umbrella organisation promoted by the Reserve Bank of India and owned by a consortium of banks, launched IMPS, it electrified the banking sector, enabling instant bank transfers 24x7. IMPS was a significant advance over National Electronic Funds Transfer (NEFT) and Real-Time Gross Settlement (RTGS), which are processed in scheduled batches 30 minutes apart, initially only during office hours. Then, in 2016, NPCI launched UPI, which utilises a virtual payment address (VPA) built on the IMPS infrastructure and does not require either party to know the account details of the other. A bank generates a VPA for its customers when they link their account to a UPI-enabled app.

What IMPS initiated, UPI has not just replicated but magnified to staggering proportions.

Look at the numbers. In April 2025, UPI recorded 17,893.42 million transactions. In May, that number climbed to 18,677.46 million — a 4.4% increase in just a month. IMPS, by contrast, increased from 449.25 million to 463.66 million, representing a rise of around 3.2%. IMPS now accounts for 3.6% of India’s digital transactions volume; UPI rules with 79.6%.

UPI offers the simplicity of mobile-based payments, is mostly free, and is increasingly global. IMPS requires the payer to register the recipient’s bank account number and IFSC code, which makes it more secure but less convenient.

UPI’s biggest advantage is that the Indian government subsidises it and offers it at zero cost to users, while each IMPS transaction typically costs the payer’s bank ₹5 plus 18% GST.

Apoorva Javadekar, chief economist of Muthoot FinCorp, says, “There is no doubt that volume and value transacted using UPI dwarfs IMPS transactions. For example, UPI processed 185 billion transactions with a total value of ₹260 lakh crore, IMPS processed 5.61 billion transactions with ₹71 lakh crore in FY25.”

Should banks then stop offering IMPS as a payment route? If more and more customers prefer UPI, why should banks continue to maintain an expensive infrastructure for IMPS as a transaction service? However, to dismiss IMPS entirely might be premature.

UPI’s reign

UPI has rewritten the digital payments playbook in India. Its interface is seamless, transactions are instant, and its reach is unparalleled. From vegetable vendors in small towns to high-end boutiques in metro cities, UPI is everywhere, as long as both parties have bank accounts. UPI works across banks, has a minimal entry barrier, offers innovative features such as UPI Lite and credit-on-UPI, and is internationally accepted.

In FY25, UPI facilitated approximately 185 billion transactions, a 41% increase on the previous year. The total value? A jaw-dropping ₹260 lakh crore, up from ₹200 lakh crore the year before. This isn’t just dominance — it’s a paradigm shift. India now accounts for nearly half (48.5%) of all real-time payments globally.

The hidden strengths of IMPS

IMPS is not without its strengths. While UPI generally caps a single transaction at ₹1 lakh, IMPS allows transfers of up to ₹5 lakh. This makes it more suitable for high-value transactions, particularly in business contexts. It also provides broader access points — not just mobile apps, but ATMs, Internet banking, and even SMS-based options.

“Only around 8% of the UPI transactions are P2P and above ₹2,000, clearly suggesting that IMPS is a preferred payment method to support larger valued business transactions,” says Javadekar, citing NPCI data. UPI glitches make it less reliable for high-value transactions, with businesses preferring IMPS, which uses more reliable netbanking platforms. IMPS provides a useful alternative during UPI’s scheduled downtime (IMPS does not have any scheduled downtime).

Madan Sabnavis, chief economist, Bank of Baroda, says, “IMPS still has its part to play and should be looked at from the point of view of online transfers such as NEFT and RTGS, where one gets a limit of ₹5 lakh. UPI has a lower limit of ₹1 lakh, so there is a role for IMPS. It is comparable to UPI in terms of similar limits and outperforms when the limit is higher. Both are instantaneous. UPI can have differentiated limits depending on the bank.”

Kunal Varma, CEO and founder of Freo, a digital banking platform, says, “There are some treasury/corporate payments which still funnel through IMPS for added confidence and tracking.” Phasing out IMPS would be complex. Banks would need to migrate all high-value and business-centric payments to UPI or another alternative. Many customers, especially corporates, are comfortable with IMPS. Regulatory guidelines would also need to change, and banks would lose an important backup route, thereby increasing the risks associated with downtime.

Cost vs confidence

Maintaining IMPS requires dedicated servers, compliance systems, onboarding processes, and integration with member banks. And these costs aren’t always visible to the user. “IMPS has ongoing costs, including servers to provide dedicated service, ongoing compliance systems and onboarding systems to integrate with member banks. Considering the volume and level of reliability that IMPS provides for high-value, time-sensitive payments, the costs still make sense. Banks want to give their customers many channels to transfer their money digitally. Redundancy is an important part of reliability as a system,” says Varma.

IMPS’s relevance may be reinforced, paradoxically, by UPI’s very success. Should the government stop subsidising UPI, the platform could start charging merchants a merchant discount rate (MDR), altering its zero-cost advantage. Javadekar says a typical IMPS transaction costs around ₹4-5 for a ₹1 lakh transfer. Even a 0.2% MDR on ₹1 lakh would mean ₹200 that the merchant would have to pay in case the government stops the UPI MDR support. “The allocation is already down to ₹1,500 crore in the latest Budget from ₹3,500 crore in earlier Budgets, and any further reduction would potentially prompt MDR implementation for the viability of the UPI ecosystem. In this case, IMPS could gain even more favour, especially for business-to-business transactions,” says Javadekar.

IMPS holds its ground in the B2B domain. Its structured, bank-linked system appeals to enterprises that need speed, formal recordkeeping, and reconciliation. For them, reliability often takes precedence over ease of use. As Varma notes, “If UPI implements MDR, IMPS could become more prominent for banks and payment service providers looking to make money; some IMPS transactions already have the fee structure for some transfers, and merchants or corporates may deem IMPS relevant for specific use-cases, in particular where speed and reconciliation matter.”

For individual users, there is a loyalty factor. Some prefer bank apps over third-party apps, IFSC over virtual IDs, and direct transfers over QR scans. In many Tier II and III cities, especially among older demographics, IMPS remains the fallback system of trust.

Varma says, “If cross-border UPI amplifies, IMPS may even more heavily start to focus on domestic high-value, real-time payments and specific business use-cases. IMPS may also act as a vital redundancy layer, ensuring business continuity as India’s digital payments environment further evolves. IMPS could very well be more specialised in the future rather than be discontinued.”

Not either-or

The real question might not be whether IMPS should be scrapped, but whether we need to see these systems as rivals at all. They may be more complementary than competitive. UPI serves the masses — quick, small-value, peer-to-peer payments. IMPS serves the niches — higher-value, institution-backed, time-sensitive payments. “Withdrawing IMPS will remove convenience for customers, given that not all are using UPI. The higher age group customers may not be using UPI, and hence withdrawing IMPS will mean they have to use NEFT and go with the time lags involved in such transfers,” says Sabnavis.

“It is important to realise that IMPS and UPI are not direct competition but complementarities in the payments ecosystem, as the end users are largely different, or the same users utilise both the platforms for different transactions. Hence, both would continue to hold their importance in the payment ecosystem in my view,” says Javadekar.

The digital payments revolution is entering its next phase, one where choice, reliability, and inclusivity will matter just as much as speed and cost. So IMPS still has its place. It may not be flashy or free, but it is sturdy and time-tested.

Should banks drop IMPS? Not while options matter. Not while redundancy matters. And not while there is a market for precision and structure over convenience. As India builds the world’s most robust digital payments ecosystem, it must resist the urge to discard the old just because the new is dazzling. After all, the future is rarely about either-or — it is almost always about both.