Cash deposit via UPI possible soon, says RBI

RBI’s Monetary Policy Committee (MPC) meeting today announced a slew of new measures, in addition to maintaining the repo rate at 6.5% for the seventh consecutive time, pretty much in line with market expectations. This comes as inflation remains well above RBIs target of 4%. 

In addition, the apex bank also proposed cash deposits in banks by means of UPI, along with making prepaid payment instruments (PPIs) issuer-agnostic and interoperable for UPI payments. This means that PPI wallet holders on platforms like MobiKwik, Google Pay, PhonePe and Amazon Pay will be able to link their wallets to other third-party UPI apps and make payments.

In its statement, the RBI governor noted that “at present, UPI payments from Prepaid Payment Instruments (PPIs) can be made only by using the web or mobile app provided by the PPI issuer. It is now proposed to permit the use of third-party UPI apps for making UPI payments from PPI wallets. This will further enhance customer convenience and boost adoption of digital payments for small value transactions”. 

With this, PPI could become the go-to for making small UPI transactions, instead of frequently routing small debits through the bank. 

As per Mandar Agashe, Founder & MD, Sarvatra Technologies Pvt Ltd, “Till now, PPI holders were only able to make UPI transactions by using the application provided by the PPI issuer. This effectively meant that if the PPI issuer wouldn’t support UPI payments, then the users would not be able to make payments through UPI at all.

“In the non-urban towns and rural areas, there are still many small banks who do not provide UPI payments facility to its customers. These customers are dependent on third-party PPIs for making digital payments. Challenges like the unavailability of UPI on that specific PPI issuer or not being able to use another third-party PPI while their PPI issuer would face technical issues will now be resolved. The users of PPIs will be able to make payments via UPI just like the bank account holders”, he continued. 

Shivaji Thapliyal, Head of Research and Lead Analyst, Yes Securities, also lauds the move, noting that this move has thrown the wallet market wide open. 

“This move serves to make PPI wallets somewhat inter-operable and democratizes the Wallet market. It may be noted that, in FY23, Paytm Wallet had a gross merchandise value (GMV) of USD 19.1bn, with Mobikwik being a distant second with USD 1.01bn GMV.  would be interesting to see what scenarios could emerge if third party UPI apps, which would include Paytm, would be able to access other PPI wallets. 

In addition to this, RBI is also set to introduce debit-card less deposit of cash. At present, you can only deposit cash in your account at the ATM or CDM by using your debit cards. Notably, at present, it is possible to withdraw cash via UPI at ATMs.