• UGI USER
  • Feb 16, 2024
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PAYTM BANK’S EXIT FROM UPI UNLIKELY TO BE DISRUPTIVE

Why in the news?

  • The regulatory-mandated exit of Paytm Payments Bank from the Unified Payments Interface (UPI) platform, a popular digital payment system in India.
  • Out of 90 million Paytm UPI users, only about 15 million exclusively use the app for transactions.
source:gyanias

What are Payment banks:

  • Payment banks, like Airtel Payments Bank and India Post Payments Bank, operate on a smaller scale without credit risk involvement.They perform typical banking operations but cannot provide loans or issue credit cards.
  • Payment banks can accept demand deposits (savings and current accounts) but not time deposits, and cannot establish subsidiaries for non-banking financial services.
  • Objectives:Promote financial inclusion by offering small savings accounts and payment/remittance services.
UPI (Unified Payments Interface):

·    India’s mobile-based fast payment system enabling instant transactions 24/7.

·    Users utilize a Virtual Payment Address (VPA) to conduct transactions securely without revealing sensitive bank account details.

Virtual Payment Address (VPA):

·    Unique identifier for individuals within the digital payments system.

·    Created by users to facilitate fund transfers, serving as an alternative to sharing confidential bank account information.

National Payments Corporation of India (NPCI)

·    National Payments Corporation of India (NPCI) serves as the overarching body for all retail payment systems in India.

·    Established with guidance and support from the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA).