The Unified Payments Interface (UPI) is closing in on the $1 trillion mark. It has already surged 86% year-to-date to $844 billion (₹63.32 lakh crore) as of end November against $452 billion (₹33.88 lakh crore) seen in CY20.

The CY21 number is an astounding growth of 7090x from ₹893 crore clocked in 2016, the year of its launch.(See: Gaining currency)

UPI has been created by the National Payments Corporation of India, an umbrella organisation for operating retail payments and settlement systems in the country. While the Reserve Bank of India chose to play it safe by not hiking repo rates as part of its monetary policy meet, it showed aggressive intent with regards to digital penetration of banking and financial services, especially among the unbanked.

The regulator has suggested UPI-based payment products for feature phones which will increase digital penetration of banking services among a segment of population without access to smartphones or reliable internet services. Compared to smartphones, feature phones in India sell in the ₹1,000 to Rs 1,500 range, falling to as low as ₹500-600 for unbranded ones. The on-device wallet in UPI app will ensure faster transaction experience for the user.

The RBI's focus on UPI is not surprising considering how it has emerged as the single largest retail payment system in terms of volume of transactions since its launch in April 2016. For now, UPI is largely used for small ticket payments. With 14 crore transactions per day in November and an average transaction size of Rs 1,836, 50% of the transactions were below Rs 200.

Since 2019, UPI has also become a popular payment option for IPOs, with 12.4 lakh applications funneled through the interface. With the RBI now proposing to enhance the UPI transaction limits for retail investors in government securities and initial public offers from ₹2 lakh to ₹5 lakh, the numbers will rise manifold.

The NPCI is looking at $1 trillion worth of transactions annually through UPI with about 300 million active users monthly on the digital payments ecosystem. While digital payments are on the rise, cash in circulation continues to be high at around ₹30 lakh crore.

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