In a significant move to further enhance the inclusivity and utility of the Unified Payments Interface (UPI), the National Payments Corporation of India (NPCI) has introduced a groundbreaking feature known as “UPI Circle.” This initiative is designed to address the needs of users who remain dependent on cash for their daily transactions due to their inability to manage finances through their bank accounts. The UPI Circle was endorsed during the UPI Steering Committee meeting on August 3, 2023, marking a new chapter in the evolution of digital payments in India.

Why The Need For UPI Circle?

While UPI has already established itself as the preferred mode of payment for millions of users by offering a seamless and secure digital payment experience, there remains a segment of the population that continues to rely on cash. These users often face barriers in managing their finances through traditional banking channels, which hinders their ability to fully participate in the digital economy. UPI Circle aims to bridge this gap by allowing primary users to delegate payment responsibilities to trusted secondary users.

How Does UPI Circle Work?

UPI Circle is a feature that enables a primary UPI user to authorize a trusted secondary user to perform transactions on their behalf. This delegation can be done either partially or fully, depending on the needs and preferences of the primary user. The introduction of UPI Circle caters to individuals such as the elderly, differently-abled, or those without the ability to manage their finances independently.

Full Delegation allows the primary user to grant a secondary user the authority to initiate and complete transactions within predefined spending limits. For full delegation, members must enforce a maximum monthly limit of INR 15,000 per delegation and a per-transaction limit of INR 5,000. This feature is particularly useful for individuals who need someone else to manage their day-to-day financial transactions.

Partial Delegation offers an additional layer of control, where the primary user permits the secondary user to initiate payment requests. However, the final authorization of the transaction requires the primary user’s UPI PIN, ensuring that the primary user retains ultimate control over their finances. Existing UPI limits shall be applicable in case of partial delegation.

UPI Circle Security And User Experience Enhancements

NPCI has emphasized the importance of security and user experience in the rollout of UPI Circle. To ensure the safety of delegated transactions, several guidelines and protocols have been established:

• Independent User Journeys: UPI apps and Payment Service Providers (PSPs) are required to offer distinct user journeys for primary and secondary users. This ensures that both users can choose their preferred UPI apps without any restrictions.
• Mandatory Security Protocols: Secondary users must authenticate their identity using app passcodes or biometric methods such as fingerprint or face recognition before initiating any transaction. This measure is crucial to prevent unauthorized access and maintain the integrity of the UPI system.
• Seamless Linking Process: The primary user can link a secondary user by scanning a QR code or entering a UPI ID, followed by selecting the contact number from their list. In later phases, manual entry of mobile numbers for linking will be restricted to enhance security.
• Delegation Limits: A primary user can delegate up to five secondary users, while a secondary user can accept delegation from only one primary user. This restriction helps manage and monitor the flow of transactions within a controlled environment.

UPI Circle Operational Guidelines And Compliance

To ensure the smooth operation and integration of UPI Circle, NPCI has set forth several operational guidelines:

• Cooling Period and Transaction Limits: A cooling period of 24 hours is imposed after the successful linking of a primary and secondary user. During this period, a daily transaction limit of INR 5,000 is enforced for both full and partial delegations to mitigate potential risks.
• Visibility and Control: Primary users are granted full visibility of transactions performed by secondary users, both on their UPI app and bank account statements. This transparency is vital for monitoring and managing delegated transactions.
• Compliance with RBI Guidelines: All members involved in the UPI ecosystem must adhere to the Reserve Bank of India (RBI) guidelines on the Harmonization of Turn Around Time (TAT) and customer compensation for failed transactions. These guidelines ensure that users are compensated promptly in case of transaction failures.
• Online Dispute Resolution (ODR): ODR functionality will be available for all UPI transactions under the UPI Circle, providing users with a streamlined process for resolving any disputes that may arise.
• Reconciliation and Settlement: The reconciliation process for UPI Circle transactions will follow existing UPI guidelines. A new purpose code in the UPI raw file and an additional line item in the Net Settlement Report will be introduced to identify and settle UPI Circle transactions accurately. An additional raw file containing details of secondary users will also be provided, which will be shared with the primary PSP, secondary PSP, and remitter bank.

Conclusion

The introduction of UPI Circle by NPCI represents a significant advancement in the UPI ecosystem, particularly in its quest to include users who have been traditionally underserved by digital financial services. By enabling the delegation of payment responsibilities, UPI Circle not only empowers users who are unable to manage their own accounts but also enhances the overall security and functionality of UPI transactions. As this feature rolls out, it is expected to further increase UPI adoption across diverse user segments, reinforcing UPI’s role as the backbone of India’s digital payments landscape.