NPCI Bets on UPI Lite to Make Offline Payments a Reality


The Indian government and financial institutions are going the extra mile to ensure everyone has access to digital financial services.

The National Payments Corporation of India (NPCI) is tinkering with the idea of making UPI available for offline payments. According to a report by Mint, NPCI is working with a few banks to let people make digital payments in offline mode, that is without any Internet connection.

Termed as UPI Lite, the first rollout of this solution will be available to users in rural areas. To begin with, users will only be able to transfer a maximum of Rs 200 from one account to another. This solution is targeted at people who, due to the limitations of feature phones, haven’t made digital payments.

Banks and NPCI are parallelly testing two solutions to make this happen. One is the SIM overlay technique, which will require the help of telecom companies. The other solution is software-based that will use over-the-air (OTA) updates.

For the SIM overlay to work, users will have to visit their telecom providers’ centers and get the overlay embedded in their SIM. Then via SMS, users can create their UPI id. Once the UPI id is created, they can start sending and receiving money from people in their contacts. However, the other person also has to have a UPI id for this to work.

Repeated tests

This is not the first time that NPCI is trying to push offline payments in rural areas. In 2012, NPCI rolled out UPI-led offline payments over Unstructured Supplementary Service Data (USSD) networks. However, it failed to kick off in a big way due to SMS charges.

NPCI’s data revealed that in 2021, the USSD system was used for transactions worth Rs 1.21 lakh. Till December 2021, 83 banks were live on the USSD system.

Recently, we wrote about RBI releasing a framework for offline digital payments for small value transactions of up to Rs 200. These offline payments can be made using different instruments, like cards, digital wallets, or mobile devices in face-to-face mode (proximity) to the recipient.

If NPCI’s current experiments work out in the way it expects them to, about 350 million feature phone users in the country would be able to make digital payments without any Internet connection.

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