The launch of the Unified Payments Interface (UPI) by the National Payments Corporation of India (NCPI) on Monday is a breakthrough step not just for the way in which Indians bank but also for how they transact online. In essence, the UPI will simplify the way payments are made — it will leverage the rapidly deepening mobile penetration in the country to facilitate monetary transactions at the press of a button. A customer can use the UPI instead of paying cash on delivery from online shopping websites or other bills etc. The ease and security — the UPI allows for a two-factor authentication — with which transactions can now happen over a mobile will be a boon for a lot of businesses, especially small- and medium-sized entrepreneurs. The NPCI has built on the Immediate Payment Service (IMPS) platform — through which one could transfer money instantly by going online — by adding another layer that allows easy debit capability even on mobile phones. RBI Governor Raghuram Rajan, who has been a driving force behind the structural change in Indian banking, said: “For a number of years, we have been saying we need a revolution in banking in India. I think we can confidently say the revolution is upon us”.
Over the past few years, the Indian banking structure has been undergoing a tectonic change often lost in the bad news about growing non-performing assets, loan write-offs and wilful defaulters. Starting with a report authored by Rajan for the Planning Commission, titled “A hundred small steps”, in 2009 to the Nachiket Mor-led “Committee on Comprehensive Financial Services for Small Businesses and Low Income Households” report in December 2013, the RBI has cast aside its historically conservative approach to unveil a wide range of banking solutions. As a result, as against just 12 new bank licences being issued since liberalisation till early 2014, the RBI awarded 10 licences for small finance banks (which are commercial banks but with a sectoral focus among the unserved sections of the economy) and 11 licences for payments banks (which will only deal with deposits and remittances, not credit).
