March 2025
March is a busy month - Companies are busy with appraisals, closing of numbers for present FY, and planning for next FY. And people are busy with buying insurance/MFs (to save taxes), celebrating/cribbing about appraisals, celebrating Holi (festival of colors), waiting for Mango season, or planning for upcoming summer vacations.
Those who are not actually busy can still be busy with the IPL 2025 (watching, talking and more talking).
Payments domain was also busy - here is the March 2025 update.
I. March and Banks
If you go by trend, March is not a good month for banks.
Yes Bank was put under moratorium from 5-18 Mar 2020 (Impacted many PAs and PhonePe)
PayTM Payments Bank was asked to stop operations by 15-Mar-2024 (Notice was sent on 31st March, initial deadline was 29 Dec but then extended by 15 more days)
In March 2023, USA based Silicon Valley Bank, Silvergate Bank and Signature Bank failed
And this March, IndusInd was in the spotlight with its issues (Read this article).
So, dear banks, please be careful in March 🙂
II. NPCI Realm
A. NPCI Blinked
On 26th March evening, UPI faced an outage followed by fluctuations for roughly an hour. UPI didn’t work for some time and it is a big deal when UPI is the most prominent payment method.
Roughly 6.8K transactions worth Rs. 92.6 Lakh are impacted if UPI is down for a second. Yes, for a second!
NPCI Sneezes and India gets Cold!
B. UPI and RuPay DC MDR
Payment Council of India (PCI), industry body that represents FinTechs/Payment companies, has written a letter to the Honorable Prime Minister to reconsider bringing back MDR on UPI (linked to bank account) and RuPay Debit cards.
The industry body is proposing 0.30% MDR on UPI (linked to bank account) for large merchants (i.e. >Rs.40 Lakh turnover). Of course, P2P and P2PM (payment at small stores) is kept out.
Reduction in subsidies (Reduced from Rs.1500 Cr of FY25 to Rs.437 Cr for FY26) and increasing operations and compliance cost, the ecosystem participants are keen on having MDR.
C. UPI Lite
It is a device wallet where the user can top-up the wallet and make the payment up to a certain amount without need of 2FA (entering MPIN).
UPI Lite is a wonderful payment instrument for small amount payments: (1) Faster checkout (no need to enter PIN) (2) Lesser entries in bank statement (3) Auto top-up of wallet feature (if wallet balance drops below a set amount, top up is one to the max limit)
And this month, UPI Lite had a quite few updates
Enhancement to UPI Lite Limits [Link]
After its launch, UPI Lite limits were enhanced once and then again in Aug '24.
But issuers/TPAPs didn’t implement the new changes.
Now, NPCI has asked UPI Lite issuers and TPAPs to implement the limits immediately.
New changes for UPI Lite [Link]
New changes to be implemented by 31st March 2025
Refunding of UPI Lite balance of inactive accounts [Link]
UPI Lite issuers have to refund the UPI Lite wallet balance back to the source account if the wallet is inactive (i.e. no transactions) for six months.
Participants to implement the changes by 30-June-2025
Note: Cleaning up inactive payment instruments is not new. RBI and NPCI have similar rules for cards (either deactivate cards that are not used for a year and UPI Id/VPAs (remove VPAs not used for a year). It may look like a ‘housekeeping’ activity but will definitely help in reducing frauds.
D. UPI Number Mapper [Link]
Banks/TPAPs to use Mobile Number Revocation List (MNRL)/Digital Intelligence Platform (DIP) update list of mobile numbers on weekly basis (at least)
TPAPs to get explicit user consent and clear opt-out for seeding or porting UPI Number and TPAPs/Banks should be mislead customers about UPI Number (Ha ha)
If NPCI response time is longer then PSP can resolve the number locally
PSPs to report monthly data to NPCI - Total UPI Ids linked to mobile numbers, number of active UPI users, transaction made and locally resolved UPI-number based transactions
Deadline to implement the changes: 31-Mar-2025
E. Modification to UPI Chargeback rules [Link]
As per NPCI circular OC/184 of 5-Dec-2023 [Link], following changes are done to chargeback
Max 5 chargebacks in 30 days rolling for Payer & Payee (basis VPA) combination
Total chargebacks per customer (basic originating VPA) 10 in 30 days rolling
Reduction of TAT to 30 days for raising chargeback on Small and Offline merchants
With the new circular (OC/184A), NPCI is exempting the capping of 5 chargeback (Payer VPA to Payee VPA) and 10 chargeback (bank account number + IFSC) on chargebacks raised on fraudulent transactions.
Implementation Date: 15-Mar-2025
F. UPI increased foot print in Singapore
NIPL (a subsidiary of NPCI) has partnered with HitPay of Singapore to enable UPI acceptance across 12,000 merchants.
G. Launch of BHIM 3.0 and BHIM Vega
NPCI BHIM Services Limited (NBSL, a subsidiary of NPCI) BHIM 3.0 and BHIM Vega
BHIM was launched on 30-Dec-2016, then BHIM 2.0 was launched on 21-Oct-2019, and now BHIM is unveiled in its 3rd avatar
Hope Third Time's the Charm!
BHIM Vega is UPI Plug-in, a lite-TPAP product where customer has to register for UPI on merchant App and UPI payment will be done within the merchant App (Article on UPI Plug-in)
H. EPF withdrawal from UPI [Link]
EPFO (Employment Provident Fund Organization) intends to provide a facility for users to withdraw EPF amounts via UPI to their bank accounts. Wonderful!
1 out of 3 EPF claims are rejected and the lucky ones who get the claim may spend considerable time and effort.
So will UPI solve all these problems? Or is this just a token project to show that even EPFO is doing something with UPI?
Hmmm… UPI is like Aloe Vera - using it will make anything look or feel awesome and wholesome 🙂
I. AI powered FASTag:
NPCI is working on a proof of concept (POC) to use AI to read vehicle number plates to deduct the fees at parking lots, instead of RFID readers. This new system will reduce failures, minimize manual intervention and improve efficiency.
III. RBI Realm
1. DPAW (Digital Payments Awareness Week)
RBI celebrated DPAW from 10-16 March. RBI conducted various campaigns on social media and other mass communication channels. Many PSOs (Banks, PAs, TPAPs etc.) voluntarily participated in their own capacity to increase awareness about digital payments.
RBI is playing a pivotal role in increasing awareness about payments, frauds etc. with ‘RBI Kehta hai’ ads.
2. Still there are Rs.2000 currency notes
RBI reported that 98.18% of Rs.2000 are returned and still Rs.6,916 Crore worth Rs.2000 notes are with the public (guess, who has those 🙂)
Background: After demonetization of Nov-2016, RBI issued Rs.2000 notes to bridge the demand. And later in May ‘23, RBI announced the withdrawal of Rs.2000 notes. So far, RBI has not given a final deadline.
Those who are still sitting on Rs.2000 notes can exchange it in RBI.
On a separate news, RBI is planning to issue Rs.100 and Rs.200 currency notes bearing signatures of new RBI Governor, Shri Sanjay Malhotra.
3. Fines and Penalties:
In the month of Mar, RBI has imposed ~4.75 Crore fine on following entities:
A total of 1.04 Crore fine on 32 cooperative banks
A total of 1 Crore fine on 12 NBFCs including JM Financial Products, Fairassets Technologies (Faircent), RangDe P2P, Mahindra Rural Housing Finance etc.
Rs.54.7 lakh fine on Phoenix ARC and Experian Credit Information company
A total of 2.14 Crore fine on 4 banks - IDBI & CITI (For FEMA violation), Punjab and Sind bank (for lapses in reporting large exposure and financial inclusion) and HDFC (for non-issuance of Unique customer Identification code and not classifying customer into low, medium, high category)
4. Increase in ATM Fees:
RBI has increased fees for cash withdrawal (Rs.17 → Rs.19) and fees for balance enquiry (Rs.6 → Rs.7) effective 1-May-2025.
ATM Fee is applicable
User has exhausted monthly limits i.e. 5 for metro and 3 for non-metro
User uses the card on other than her home bank’s ATM including white-label ATM (e.g. when you use your HDFC debit card to withdraw cash in ICICI bank’s ATM)
Cardholder’s bank will pay this fee to the bank that operates the ATM and, of course, cardholder’s bank will recover/pass on the fee to the cardholder
Increase in ATM fees may - (1) Reduce cash withdrawal (Hmm… still we love cash) (2) a price sensitive user will use his home bank’s ATM more (3) Banks and white-label ATM operators will earn more revenue.
5. Trade settlement in local currencies
India and Maldives to settle trade transactions in INR or Maldivian Rufiyaa, in addition to the existing ACU (Asian Clearing Union) mechanism. Both the countries had signed the MOU in Nov-2024.
RBI signed an MOU (Memorandum of Understanding) with Bank of Mauritius to promote local currencies (INR and Mauritian Rupee) for bilateral transactions.
RBI/GOI has been pursuing internationalization of Indian Rupee and Indian payment platforms (UPI, RuPay, BBPS) [For details: Read this article]
5. SRO for Account Aggregator (AA)
RBI is called for applicants for SRO (Self-Regulatory Organization) for Account Aggregator (AA) ecosystem. The AA model is a complex ecosystem that involves various entities - Financial Information Providers (FIPs), Financial Information User (FIU), TSPs, AAs. For the smoother adoption and stabilization, RBI is proposing a dedicated Self-Regulatory Organization for the AA ecosystem (SRO-AA).
Objectives of SRO-AA
Adopt objective, well-defined and consultative processes to make rules relating to conduct of its members and monitor the compliance of these rules.
Promote a culture of regulatory compliance and public good by the participants
Act as the collective voice of its members in engagements with the RBI, other regulators
Collect and share relevant information with the RBI to aid in policy making.
Undertake/ encourage a culture of R&D within the AA ecosystem to encourage innovation
Interested applicants to apply for SRO-AA by 15-June-2025
Reference links: Article on AA, RBI notification
IV. Payment Entities/FinTech Realm
A. PA - Online
Ftcash and Vay Network Services (Vendor2Pay) received Online Payment Aggregator License.
So far 46 entities have received final authorization
B. PA - Cross Border
BriskPe received in-principle approval from RBI to operate PA-Cross Border. BriskPe operates PA-CB-Import and it has raised $5M from PayU in Apr '24.
C. Funding and Acquisitions
PayU buys 43.5% stake in Mindgate [Link]
Mindgate is a UPI infra provider which works with banks like HDFC, SBI, and PNB.
UPI Infra/TSP space is crowded with players like Olive, Sarvatra, Infrasoft, NPST, Juspay etc. Even the leading PAs such as RazorPay and Cashfree have built UPI TSP for banks, which they use for their own merchant payment processing.
Zolve, a cross-border neo-bank, raised $251M.
Zolve helps Indian migrants (especially students) to get access to credit card, account or insurance without social security number or US credit score through its partner banks in the USA.
M2P, a Payments infrastructure company, acquired Mad Street Den/Vue.ai (full stack AI platform).
AI is here, it is happening now… Companies will build AI tools and/or acquire companies that have expertise in AI.
OneStack, a FinTech focused on digitizing cooperative banks, has raised $2Million Series A funding. There 1913 different types of cooperative banks (State, District central, Urban). Cooperative banks play a crucial role in smaller towns and rural areas. As a farmer, I know the challenges of dealing with cooperative banks and definitely digitization will help and boost the rural financial infrastructure.
D. PA and Orchestrator Dynamics
After PhonePe, Razorpay and Cashfree, Paytm announced that it will not support merchants via third party orchestrators (e.g. Juspay).
Juspay ‘open sourced’ its orchestrator, now merchants can deploy it in their infra and manage payments.
Industry: ICCL Cut off time change
Merchant payments are versatile - every sector has its own flavour and merchants within that sector may have their own specific flows.
Example: Education merchants surcharges fees model whereas eCommerce merchants work on upfront deduction fee model. Government merchants may be fine with T+1 day settlement whereas NBFC would want T+0 day settlement.
And then… There is the Mutual Fund sector.
If payments in other sectors is like Football or cricket then payments in Mutual Funds is like Quidditch.
Payments in the Mutual Fund segment are complex w.r.t. settlement times, fund flows and reporting.
Only UPI (linked to bank a/c) and Net-banking
TPV (Third Party Validation)
Surcharge to customer or invoice to merchant (as full amount goes towards the investment / NAV)
Funds to be settled directly to ICCL’s account and only from empaneled banks.
Settlement time is 12:30PM for Liquid Funds and 2PM for non-liquid funds
Note: ICCL (Indian Clearing Corporation Limited) is subsidiary of BSE (Bombay Stock Exchange) and NSCCL (National Securities Clearing Corporation Limited) is subsidiary of NSE (National Stock Exchange).
On 6-Mar-2025, ICCL issued notice to PAs/Banks for the change in settlement time for Liquid Funds (changed from 12:30 PM to 1PM) and for Non-Liquid Funds (changed from 2PM to 2:30PM) effective from 23-Apr-2025.
That's the wrap of March 2025!
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