What are the payment systems led by the Government of India?

What are the payment systems led by the Government of India?

The main payment systems led by the Government of India include the following, which are designed to promote digital payments, financial inclusion and efficient settlement:

1. UPI (Unified Payments Interface)

  • brief: Launched by the National Payments Corporation of India (NPCI) in 2016, it is a real-time instant payment system.
  • specificities::
    • Supports inter-bank transfers, merchant payments, bill payments and more.
    • Simplify operations with Virtual Payment Addresses (VPAs) (e.g.xxx@upi).
    • Integration with multiple banks and third-party apps (e.g. Google Pay, PhonePe, Paytm).
  • Government Affiliations: Operated by the Central Bank (RBI)-backed NPCI, it is heavily promoted by the government.

2. IMPS (Immediate Payment Service)

  • brief: 24/7 real-time microfinance transfer system introduced by NPCI.
  • specificities::
    • Provides 24/7 service with lower transaction limits.
    • Payee account number and IFSC code need to be entered.

3. RuPay

  • brief: India's homegrown debit/credit card network (similar to Visa/Mastercard), operated by NPCI.
  • specificities::
    *-* Reduced dependence on international card networks.
    *-*Promoted in conjunction with "Pradhan Mantri Jan Dhan Yojana" financial inclusion programme.
    *-*Supports domestic and some international transactions.

4.Aadhaar Enabled Payment System (AEPS)
–brief:: Inter-bank settlement system based on Aadhaar biometric authentication (fingerprint/iris).
–specificities:
　-Allows basic banking (cash withdrawals, deposits, transfers, etc.) with only Aadhaar number + bio-verification.
　-Designed for rural users without smartphones or bank cards

5.BHIM (Bharat Interface for Money)
–Official mobile payment app developed by the government based on UPIStreamline UPI operations

6.NETC (National Electronic Toll Collection)
–National Electronic Toll Collection System"FASTag", for example, automatically deducts motorway tolls.

Other relevant initiatives.
–e-RUPI:: A digital coupon system for targeted benefit delivery (e.g., medical subsidies) to be launched in 2021.
–DigiLocker:: Cloud identity storage with payments, reducing KYC file requirements

The core objective of these systems is to reduce cash dependency and enhance financial inclusion - UPI has exceeded 10 billion transactions per month by 2023 (with over 750 million RuPay cards issued), reflecting the government's successful push on digital infrastructure

The Indian government's push in the digital payments space is not limited to building infrastructure systems, but continues to strengthen its dominance through policy integration, technological innovation and ecological expansion. More in-depth additions and analyses are provided below:

7. e-RUPI (digital rupee coupons)

  • contexts: Launched by Prime Minister Modi in 2021, developed in partnership with NPCI.
  • functionality::
    • Prepaid digital vouchers based on QR codes or SMS that can be used without a bank account or smartphone.
    • Dedicated to specific scenarios (e.g., Medicaid, education costs, agricultural subsidies) to prevent misuse of funds.
  • Government Role: Directly for social welfare distribution (e.g. COVID-19 vaccine subsidies).

8. CBDC Pilot (Central Bank Digital Currency Pilot)

  • Project name: Digital Rupee (e₹), piloted by the Reserve Bank of India (RBI) on a sub-wholesale basis:
    *-*Retail version (e₹-R): Pilot in December 2022, P2P transactions between individuals.
    *-*Wholesale version (e₹-W): for large interbank settlements.
  • objectives::
    *-*Reduced cash management costs
    *-*Countering cryptocurrency risk
    *-*Enhancing the efficiency of cross-border payments

9. APBS (Aadhaar Payment Bridge System)

–System for direct transfer of government subsidies to beneficiaries' Aadhaar linked accounts–
Typical example: 'DBT (Direct Benefit Transfer)' scheme - over Rs. 30,000 crore of subsidies (e.g. LPG allowances, pensions) are disbursed annually through APBS.

10.NACH (National Automated Clearing House)
–High-volume duplicate transaction processing system(e.g., payroll/utilities withholding), operated by NPCI, replacing the traditional ECS system.

11.Innovation scaling and policy facilitation

  1. UPI Internationalisation:
    　　-Already interconnected with PayNow Singapore, UAE UAEPSS, etc.The company plans to expand into Southeast Asia and the Middle East.
    　　-Allows foreign tourists to use UPI payments during G20 summit

  2. credit fusion:
    　　-Enables UPI credit payments via RuPay credit card (launching in 2023)

  3. regulatory sandbox:: RBI set up frameworks to encourage fintech companies to test new products (e.g., voice payments/offline UPI).

  4. Infrastructure sinking:
    　　Promotion of AEPS/BHIM applications in postal banks (India Post Payments Bank) and village co-operatives.

Challenges and controversies
Despite its success, India's government-led payment system still faces problems.
–technology risk:: Increase in UPI fraud cases (over Rs. 1.5 billion loss reported in 2023).
–monopolisation challenge:: NPCI, as a not-for-profit organisation, holds the power to price the core network.
–cash inertia:: 301 TP3T people in rural areas are still dependent on cash transactions (CMS India data).

Future directions may include blockchain integration (AEPS has been tested), lower rate policies, and enhanced AI anti-fraud capabilities - initiatives that will further cement India's position as a global digital payments lab.