UPI Payment Rules Changing from April 1: What You Need to Know

The National Payments Corporation of India (NPCI) has announced new regulatory measures for Unified Payments Interface (UPI) number-based transactions, set to take effect from April 1, 2025. These updates aim to enhance security, improve transaction accuracy, and prevent fraud within India's digital payment ecosystem.

What Are the New UPI Rules?

National Payments Corporation of India (NPCI) has issued a set of strict regulations that banks, Payment Service Providers (PSPs), and third-party UPI apps like PhonePe, Google Pay (GPay), and Paytm must follow. The key highlights of the new rules include:

Weekly Mobile Number Updates

• Banks and PSP apps must update mobile number records on a weekly basis to minimize transaction errors.

• This change aims to ensure that UPI transactions are mapped to the correct user accounts, reducing instances of failed or misdirected payments.

Explicit User Consent for UPI Number Seeding

• Users will now have to explicitly opt in for their UPI number to be seeded with their accounts.

• Consent for this cannot be obtained during or before transaction processes, reinforcing user data security and transparency.

Mandatory Compliance by March 31, 2025

• All stakeholders in the UPI ecosystem—including banks, PSPs, and third-party providers—must integrate the new regulations before the March 31, 2025, deadline.

• Failure to comply may lead to regulatory actions and disruptions in services.

Local Resolution of UPI Numbers for PSP Apps

• PSP apps are now permitted to locally resolve UPI numbers if NPCI’s system experiences response delays.

• However, such instances must be reported monthly to maintain transparency and ensure operational efficiency.

Why Are These Changes Being Introduced?

The updated regulatory framework is designed to enhance security, prevent fraudulent transactions, and improve user experience. NPCI’s guidelines aim to:

• Reduce failed transactions caused by outdated or incorrect mobile number records.

• Strengthen security protocols by requiring explicit user consent.

• Ensure better accountability through mandatory reporting of local UPI number resolutions by PSP apps.

How Will the New UPI Rules Impact Users?

These changes will affect millions of UPI users in India, including businesses, individuals, and digital payment platforms. Some key impacts include:

Increased Security & Transparency

• Users will have greater control over their UPI numbers, ensuring transactions are linked to verified accounts.

• Banks and PSPs must ensure real-time updates, reducing fraud risks.

Delays & Adjustments for Digital Payment Apps

• Google Pay, PhonePe, Paytm, and other UPI-based apps must integrate these changes, which may cause initial disruptions.

• Users may need to reconfirm their consent for UPI number seeding when prompted by their payment apps.

Future of UPI and Digital Payments in India

UPI remains the backbone of India’s digital payments landscape, processing billions of transactions monthly. With these new rules, the NPCI aims to further streamline operations and improve financial security.

As digital payments continue to evolve, these regulations will pave the way for a more secure and efficient transaction ecosystem in India.

What is UPI?

UPI, or Unified Payments Interface, is a real-time payment system developed by the National Payments Corporation of India (NPCI).12 It revolutionizes how people in India conduct financial transactions.3 Here's a breakdown of what it is:

• Instant Money Transfers:

  • UPI enables immediate money transfers between bank accounts using a mobile device.4 This happens 24/7, 365 days a year.5

• Simplified Transactions:

  • It streamlines transactions by allowing users to link multiple bank accounts to a single mobile application.6

  • It also uses Virtual Payment Addresses (VPAs), which are unique identifiers, so users don't have to share sensitive bank details.7

• Key UPI Features:

  • Peer-to-Peer (P2P) transfers: Sending and receiving money between individuals.8

  • Merchant payments: Paying for goods and services at stores or online.9

  • Bill payments: Settling utility bills and other recurring payments.10

  • QR code payments: Scanning QR codes for quick and easy transactions.11

• UPI Benefits:

  • Convenience: Transactions are quick and easy, accessible from a smartphone.12

  • Security: Uses strong authentication methods, like UPI PINs, to secure transactions.13

  • Accessibility: Available to anyone with a bank account and a smartphone.14

  • Reduced reliance on cash: Promotes a shift towards a digital economy.15

In essence, UPI has transformed the Indian financial landscape, making digital payments accessible and convenient for millions of people.