On Thursday, August 8, 2024, the Reserve Bank of India (RBI) introduced a New UPI feature called Delegated Payments on the Unified Payments Interface (UPI). This innovative addition allows multiple users to conduct transactions from a single primary bank account, aiming to broaden the reach and adoption of digital payments across the nation.

The RBI's announcement has sparked significant interest, with expectations that this New UPI feature will enhance the ease of digital transactions, especially for individuals who do not have their own bank accounts. The introduction of Delegated Payments is anticipated to be a game-changer in improving accessibility and convenience for families sharing a single bank account.

New UPI feature
Image Source: Paytm

How the New UPI Feature Works

Under the New UPI feature, a primary user can set transaction limits for a secondary user on their bank account. This functionality means that secondary users, such as family members or others, can perform transactions up to a specified limit without needing their own separate UPI account. For instance, parents can now delegate transaction capabilities to their children or other household members, making financial management easier and more inclusive.

RBI Governor Shaktikanta Das highlighted that this new capability is expected to increase UPI transactions by at least 25-30%. This potential surge is due to the feature's ability to include minors and other individuals in the digital payments ecosystem, facilitating broader usage and integration of UPI.

“This product is expected to add to the reach and usage of digital payments across the country,” the RBI stated in its monetary policy update. Detailed instructions on how to use the Delegated Payments feature will be provided shortly, ensuring that users can effectively implement this new functionality.

Implications of the New UPI Feature

The New UPI feature also comes with increased flexibility for high-value transactions. The RBI has raised the UPI limit for tax payments from ₹1 lakh to ₹5 lakh, reflecting the growing importance of UPI in managing larger financial transactions. This increase aligns with the broader trend of expanding UPI's role in various financial sectors, including markets, IPOs, debt collections, insurance, healthcare, and education.

Sameer Nigam, CEO and founder of PhonePe, praised the new feature, noting its potential to safely and securely introduce digital payments to younger users and senior citizens. “In particular, it is a great way to introduce kids and senior citizens to the world of digital payments safely and securely,” Nigam remarked.

Furthermore, the RBI's policy decision to maintain the repo rate at 6.5% and its focus on inflation control underscore its commitment to a stable economic environment. Pradeep Aggarwal, Founder and Chairman of Signature Global (India) Ltd., noted that while the RBI is focused on controlling inflation, a favorable monsoon could lead to lower interest rates in the future, which would positively impact real estate sales and provide opportunities for prospective homebuyers.

New UPI Feature and Digital Lending Transparency

In addition to the Delegated Payments feature, the RBI announced the establishment of a public database for digital lending applications (DLAs). This move aims to enhance transparency by helping consumers verify the authenticity of digital lending services. The repository will be updated with information submitted by regulated entities, thereby protecting consumers from fraudulent claims by unscrupulous digital lenders.

“The repository will be based on data submitted by the REs (without any intervention by RBI) directly to the repository and will get updated as and when the REs report the details, i.e., addition of new DLAs or deletion of any existing DLA,” the RBI explained. This initiative is part of the RBI's broader efforts to ensure greater accountability and security in digital financial services.

Overall, the introduction of the New UPI feature and the new repository for DLAs are significant steps toward enhancing the digital financial ecosystem in India. By expanding UPI’s capabilities and improving transparency in digital lending, the RBI is reinforcing its commitment to fostering a more inclusive and secure digital payments landscape.

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