Source: The Hindu
Context: UPI cemented its role as the backbone of India’s digital economy, processing 2,366 crore transactions worth nearly ₹30 lakh crore in July 2026 alone.
What UPI Is
- A real-time interoperable payment system enabling instantaneous inter-bank fund transfers through mobile applications
- Built as open-architecture digital public infrastructure
- Converts a user’s bank account details into a simple Virtual Payment Address (VPA) or UPI ID
About
- Developed by: the National Payments Corporation of India (NPCI)
- Launched: piloted in April 2016 with 21 banks, under then-RBI Governor Raghuram Rajan — now expanding to over 730 participating banks
- Aim: build a seamless, interoperable, cashless ecosystem; bring unbanked and underbanked populations into formal digital finance; and enable friction-free person-to-person (P2P) and person-to-merchant (P2M) settlement.
The Three-Layer Structure
Worth fixing clearly for exams:
- TPAP — Third-Party Application Provider: the app the user sees (Google Pay, PhonePe, Paytm)
- PSP Bank — the bank that sponsors the TPAP and connects it to UPI
- NPCI — operates the central switch, routing instructions between banks
