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).

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