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NPCI Extends Market Cap Deadline for UPI Apps

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NPCI Extends Market Cap Deadline for UPI Apps

Why in News?

The National Payments Corporation of India (NPCI) has extended the deadline for Third-Party App Providers (TPAPs) to comply with the 30% transaction cap on Unified Payments Interface (UPI) transaction volumes until 31st December 2026.

Key Points:

  • Impact on Major UPI Players: This extension impacts major TPAPs like PhonePe and Google Pay, which together handle more than 80% of UPI transactions.

  • Transaction Cap: The 30% transaction cap was introduced in November 2020 to mitigate concentration risks and ensure a balanced ecosystem in UPI transactions.

Compliance Requirement:

  • Exceeding the Cap: TPAPs exceeding the 30% cap must halt onboarding new customers to comply with the rule.

  • Based on Average Transaction Volume: The cap is determined based on the average UPI transaction volume over the past three months. TPAPs that have already exceeded this cap are given a grace period to comply, with phased reductions until the deadline in 2026.

Background:

  • Initial Cap Introduction: The cap was first introduced in November 2020 to reduce risks of over-reliance on a few players in the UPI ecosystem.

  • Deadline Extension: The deadline was extended in December 2022, with the current deadline being set for 31st December 2026.

NPCI:

  • Establishment: NPCI was established by the Reserve Bank of India (RBI) and the Indian Banks' Association (IBA) under the Payment and Settlement Systems Act, 2007.

Third-Party App Providers (TPAPs):

  • Role of TPAPs: TPAPs are non-bank entities that offer UPI-based financial services via mobile apps or platforms, acting as intermediaries between users and banks (referred to as sponsor banks). They are not part of banks or financial institutions.

Conclusion:

The NPCI's decision to extend the deadline for TPAPs to comply with the 30% transaction cap is aimed at ensuring a more equitable distribution of UPI transaction volumes, preventing the dominance of a few platforms. This move is significant for major players like PhonePe and Google Pay, as it impacts their expansion plans and user acquisition strategies.


 

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