NPCI's Decision to Halt 'Pull' Transactions
The National Payments Corporation of India (NPCI), responsible for managing the Unified Payments Interface (UPI), has announced the discontinuation of 'pull' transactions, effective from October 31. This decision aims to reduce fraud incidents associated with such transactions.
Reasons for the Move
- Fraud Prevention: The shutdown of recipient-initiated person-to-person digital payments is a response to the growing number of scams where users inadvertently approve transactions and lose funds.
- Historical Context: NPCI had already capped the pull method to Rs 2,000 per transaction in 2019.
How UPI Transactions Work
- Push Transactions: Initiated by the payer, where they scan a QR code or input the beneficiary’s UPI ID.
- Pull Transactions: Initiated by the beneficiary, requiring the payer's approval through a personal identification number (PIN).
Challenges with 'Pull' Transactions
- Fraudsters often misuse pull transactions by posing as merchants to illegally extract money from consumers' bank accounts.
- This fraud has prompted NPCI to consider stricter scrutiny of unverified merchant payments.
Statistics and Impact
- Fraud Statistics: According to the Reserve Bank of India, frauds related to payment cards and internet banking surged to 29,000 cases, totaling Rs 1,457 crore in FY25, compared to 13,516 cases involving Rs 520 crore in the previous year.
- UPI Usage: UPI recorded 7 billion person-to-person (P2P) transactions in July, contributing to the total 19.4 billion transactions, a significant increase from the previous year’s 5 billion out of 14 billion total transactions.
Industry Implications
Pull transactions represent approximately 3% of UPI transactions, making the decision manageable for NPCI. However, the move highlights the need for improved security measures in digital payment methods.