The Reserve Bank of India (RBI) has recently made waves in the digital payments landscape by introducing the Delegated Payments feature during its August Monetary Policy Committee (MPC) meeting. This innovative solution aims to enhance the accessibility and efficiency of digital transactions across the nation. The essence of this feature lies in enabling a primary user to set transaction limits for a secondary user, who can then initiate payments using the primary user’s bank account. This development is set to expand the reach and utilization of digital payments throughout India.
What is UPI Circle?
UPI Circle serves as the framework for the Delegated Payments feature, providing a structured approach for primary users to delegate transaction authority to secondary users. This is particularly beneficial for families and groups, allowing individuals to manage finances collaboratively while maintaining oversight and control.
The Mechanics of Delegated Payments
Primary User: This is the account holder who initiates the Circle and retains control over the delegation.
Secondary User: This individual is trusted by the primary user and is granted limited access to the primary user’s bank account for making payments.
The UPI Circle framework enables two distinct types of delegation:
- Full Delegation: In this scenario, the primary user authorizes the secondary user to initiate and complete transactions within predetermined spending limits without needing further approval.
- Partial Delegation: Here, the secondary user can initiate transactions, but the primary user must authenticate and finalize the payment using their UPI PIN.
This dual structure ensures that users can choose a delegation style that best suits their needs while enhancing security and convenience.
Advantages of Delegated Payments
The Delegated Payments feature offers numerous benefits to consumers. It allows individuals to manage payments for their dependents more efficiently. For instance, a parent can easily make payments on behalf of their children, while elderly citizens can delegate payments to their children, maintaining oversight and preventing potential fraud. This setup enables primary account holders to keep track of transactions, ensuring they stay within budget.
Moreover, it is often more convenient to facilitate payments on behalf of a dependent rather than granting them full access to a bank account or a larger sum of money.
The Role of UPI Circle in Financial Inclusion
The introduction of the Delegated Payments feature is poised to significantly impact financial inclusion across India. By enabling a primary user to delegate payment authority, individuals without direct access to banking services can participate in digital transactions. This includes marginalized groups, children, and elderly citizens who may find traditional banking services cumbersome.
This innovation enhances security within trusted ecosystems, significantly reducing the risk of fraud. It also opens avenues for creating micro-communities in gig economies or collaborative platforms, facilitating real-time payment settlements and resource pooling among group members.
Guidelines for UPI Circle: Ensuring Smooth Functionality
To ensure a seamless experience, the National Payments Corporation of India (NPCI) has established several guidelines:
- Independent User Journeys: UPI apps and Payment Service Providers (PSPs) must provide distinct user journeys for primary and secondary users. Each user can choose their preferred UPI app.
- Mandatory Security Features: UPI apps must enforce passcodes or biometric authentication for all secondary users. The primary user will link the secondary user by scanning a QR code or entering their UPI ID, followed by selecting the secondary user’s contact number.
- Delegation Limits: A primary user can delegate authority to a maximum of five secondary users, while a secondary user can accept delegation from only one primary user. The primary user must specify whether the delegation is full or partial.
- Spending Controls: Primary users can set spending limits, with full delegation allowing a maximum monthly limit of ₹15,000 and a transaction cap of ₹5,000. During the initial 24-hour cooling period post-linking, a daily limit of ₹5,000 applies to both delegation types.
- Transaction Visibility: Primary users will have complete visibility of transactions made by secondary users through their UPI app and bank statements.
- Compliance with RBI Guidelines: Members must adhere to RBI regulations concerning turnaround times and compensation for failed transactions. An online dispute resolution mechanism will also be available for UPI transactions.
Conclusion
The Delegated Payments feature within UPI Circle marks a significant milestone in India’s digital payment ecosystem. By allowing individuals to delegate payment authority securely and efficiently, this feature promotes financial inclusion and accessibility for all. Whether it’s parents managing expenses for their children or elderly citizens simplifying their payment processes, this innovation is set to reshape the landscape of digital transactions.
As the RBI and NPCI continue to pioneer developments in the digital payments space, the Delegated Payments feature stands to revolutionize the way payments are made in India, driving convenience and security for all users.
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