Bankers flag concerns over RBI's plan to delay UPI transfers
What's the story
The Reserve Bank of India's (RBI) proposal to introduce a one-hour delay in processing high-value transactions above ₹10,000 to new payees has drawn criticism from bankers and fintechs. They fear the move could disrupt the seamless nature of digital payments. The suggestion was made by the central bank in light of rising digital frauds, which are estimated to have caused losses worth around ₹35,000 crore in FY25.
Expert opinions
Senior bankers term RBI's proposal as overkill
Senior bankers have criticized the RBI's proposal, saying it is an overkill. They argue that the real solution should be to punish and catch scammers instead of implementing such measures. A senior banker who heads digital payments operations said this move could jeopardize real-time payments in India, which have been a major success story in the payment sector.
Transaction exceptions
Exemptions in the proposal
The RBI's proposal does have some exceptions. Payees registered as merchants are exempt from any restrictions, and if a customer has previously transacted with a payee, the restriction doesn't apply again. Users can also whitelist trusted payees to bypass these restrictions. However, industry experts believe this measure would affect the popular Unified Payments Interface (UPI) more than other digital payment modes like IMPS and NEFT which already have such restrictions in place.
Transaction friction
Increased friction in transactions
The RBI's proposal has raised concerns over increased friction in transactions. Raj P Narayanam, the founder and executive chairman of Zaggle, said UPI's success is largely due to its simplicity for high-value first-time payments. He added that around 37-38% of all UPI transactions are peer-to-peer (P2P) transactions, which could be affected by this new rule.
Vulnerable protection
Proposal aimed at protecting less educated segments
The RBI's proposal seems to be aimed at protecting less educated and lower-income segments who could suffer more from these losses. Abhinav Parashar, CEO of Digio, a fintech digital infrastructure firm focusing on security and compliance, said the proposed one-hour lag for transfers above ₹10,000 acts as a circuit breaker. It gives victims a 'golden hour' to realize they are being manipulated in cases like fake electricity disconnection scams.
Scam loopholes
Fraudsters could bypass safeguards, experts warn
Parashar also pointed out that fraudsters could ask customers to whitelist their numbers, thereby bypassing this safeguard. He added when scammers remotely hijack a device (via screen-sharing apps) to initiate new UPI registrations, time delays are not enough.