Unified Payments Interface (UPI), launched in April 2016 by NPCI under RBI's oversight, completed a decade of operations in 2025. From a single-digit transaction count at inception, UPI now processes approximately 26 billion transactions monthly, accounting for nearly 80% of India's retail digital payments volume. UPI is operational in seven countries including Singapore, UAE, France, and Bhutan. The government maintains a zero Merchant Discount Rate (MDR) policy on UPI transactions, reimbursing banks through the PLI scheme.

UPI is an interoperable real-time payment system built on the Immediate Payment Service (IMPS) rails and developed by the National Payments Corporation of India (NPCI). It operates on a four-party model: the payer's bank (remitting PSP), the payee's bank (beneficiary PSP), NPCI as the switch, and the customer-facing app. Transactions are settled on a 24×7 basis, unlike traditional NEFT which follows batch settlement.

The zero-MDR policy, introduced from January 2020, means merchants pay nothing to accept UPI payments. Banks are compensated through a government-funded incentive scheme (earlier called PLI — Payment Infrastructure Development Fund and incentive scheme). This policy is central to financial inclusion but has raised sustainability concerns for payment service providers.

Regulatorily, NPCI operates under a framework authorised by RBI under the Payment and Settlement Systems (PSS) Act, 2007. The PSS Act is the primary statute governing payment systems in India, and the RBI is the designated authority.

For global interoperability, UPI has been connected to Singapore's PayNow via a bilateral linkage — a landmark real-time cross-border retail payment corridor. France's acceptance of UPI is significant as the first G7 country to do so. The UPI123Pay variant serves feature-phone users without internet, and UPI Lite enables offline small-value transactions up to ₹500 per transaction with a wallet limit of ₹2,000 — key thresholds for exams. These variants expand UPI's reach to the bottom of the pyramid, aligning with NABARD's financial inclusion mandate.