Unified Payment Interface
Also written UPI · UPI — Unified Payment Interface · Unified Payments Interface
Instant 24x7 money transfer from a smartphone using a Virtual Payment Address. It can also block money for an IPO application, up to Rs 2 lakh per transaction in the booklet.
In plain language
UPI lets you pay anyone instantly from your phone without knowing their bank account number.
Each person has a Virtual Payment Address (VPA), often called a UPI ID. You enter the VPA, the amount and your UPI PIN, and the money moves from your bank account to theirs in real time, at any hour of any day.
In the securities market UPI does a second job. When you apply for shares in a public issue, UPI can block the application money in your account instead of taking it, and release it if you are not allotted shares.
How it works
As a payment mode (Chapter 4):
- Instant transfer of funds through any smartphone using a VPA.
- 24 × 7 fund transfer on a real-time basis.
- You download a UPI-enabled bank app and log in using your bank details.
The securities-market booklet describes UPI as a system that brings multiple bank accounts into a single mobile application, merging fund transfers and merchant payments into one mechanism.
In an IPO (UPI in ASBA), three steps:
- Bidding: fill the bid with your UPI ID and submit it to an intermediary, who uploads it to the stock exchange platform. The exchange shares the bid and UPI ID with the sponsor bank appointed by the issuer.
- Blocking: the sponsor bank asks you to authorise blocking of funds equal to the application amount. You approve with your UPI PIN, and the money is blocked in your account.
- Payment after allocation: once shares are allocated, the required amount is debited and any excess is unblocked.
Rules to remember: the limit for an IPO application through UPI is Rs 2 lakh per transaction, only for retail individual investors; create your UPI ID with a bank on SEBI's list of Self-Certified Syndicate Banks; use only apps and handles on SEBI's list; submit only to a syndicate member, registered stock broker, RTA or DP; third-party UPI IDs or bank accounts are not considered for allocation.
Stale figure: SEBI has since raised the UPI limit for IPO applications to Rs 5 lakh (applicable from May 2022). For the examination, the booklet's figure is Rs 2 lakh.
A worked example
Amounts are illustrative.
Neha, 27, a software tester in Hyderabad, applies in an IPO priced at Rs 300 a share for 600 shares, an application of 600 × Rs 300 = Rs 1,80,000. That is within the booklet's Rs 2 lakh per transaction UPI limit for a retail individual investor.
She gives her own UPI ID, not her husband's, because a third-party UPI ID is not considered for allocation. A request arrives in her UPI app; she approves with her PIN and Rs 1,80,000 is blocked, not debited. It stays in her savings account and keeps earning interest.
The issue is oversubscribed and she is allotted 100 shares. The bank debits 100 × Rs 300 = Rs 30,000 and unblocks the remaining Rs 1,50,000. There is no refund to chase, because the rest of the money never left her account.
Had she wanted to apply for Rs 2,40,000 under the booklet's rule, that would exceed the Rs 2 lakh UPI limit.
Why NISM asks about it
Chapter 4 (Savings Related Products) lists UPI among digital payment modes (the one that uses a VPA and works 24 × 7). Chapter 5 (Investment in Securities Market) introduces UPI in ASBA, and the securities-market booklet's Annexure IV gives the three steps and the rules. Expect questions on the Rs 2 lakh limit, on who can use it (retail individual investors), and on third-party UPI IDs.
Common exam traps
- UPI uses a VPA; NEFT and RTGS use account number plus IFSC; IMPS on mobile uses MMID.
- In an IPO, UPI blocks money; it does not debit it until allotment. The blocked amount keeps earning interest.
- Rs 2 lakh per transaction is the booklet's IPO limit through UPI, and it is for retail individual investors only. (Since raised to Rs 5 lakh; answer Rs 2 lakh.)
- Third-party UPI IDs are rejected for allocation, even a family member's.
- The sponsor bank sends the blocking request, not the stock exchange or the company.
- The UPI ID must be with a bank on SEBI's list of Self-Certified Syndicate Banks, and the app must be on SEBI's list.
Check yourself
1.Which of the following is true of NEFT?
- a)It is used only for high value transactions
- b)There are no restrictions on the minimum or maximum amount for transfer, and it takes a few hours to be credited
- c)It requires the beneficiary's MMID
- d)It is available 24 × 7 on a real time basis
Show the answer
Answer: (b) There are no restrictions on the minimum or maximum amount for transfer, and it takes a few hours to be credited
The chapter's NEFT entry reads: "Transfer of funds from one Bank account to another. NO RESTRICTIONS ON THE MINIMUM/MAXIMUM AMOUNT for transfer. Transfer is done using beneficiary's account number and IFSC Code. Charges for transfer may differ from bank to bank. Transfer of funds can be initiated ANY TIME DURING THE DAY and it TAKES FEW HOURS to get credited in the beneficiary account." Each wrong option belongs to a different rail. High value is RTGS, which is "used to make high value transactions" and settles "instantly on a real time basis" during "the specified period on working day". MMID — a 7 digit Mobile Money Identifier — belongs to IMPS on mobile banking. And 24 × 7 on a real time basis is UPI, using a VPA. Learn the four by their distinguishing feature, not by their speed alone.
2.A business must pay a supplier ₹9,50,000 on a working Tuesday morning with same-day settlement, and separately send ₹2,000 at 11 p.m. on a Sunday. Which rails fit?
- a)NEFT for both
- b)RTGS for the ₹9,50,000, since it is real time and used for high value transactions on working days; UPI for the ₹2,000, since it is the 24 × 7 real time rail
- c)UPI for the ₹9,50,000 and RTGS for the ₹2,000
- d)IMPS for both, since it requires MMID
Show the answer
Answer: (b) RTGS for the ₹9,50,000, since it is real time and used for high value transactions on working days; UPI for the ₹2,000, since it is the 24 × 7 real time rail
RTGS is described as transfer "on a real time basis... USED TO MAKE HIGH VALUE TRANSACTIONS", initiated "during the specified period on working day" and "completed instantly on a real time basis" — which matches a large same-day supplier payment on a Tuesday morning exactly. UPI is "instant transfer of funds through any smart phone using VPA... 24 x 7 fund transfer facility on a real time basis" — the only one of the four the chapter describes as round-the-clock, which is what an 11 p.m. Sunday transfer needs. NEFT would fail the first requirement, since it "takes few hours to get credited", though it is the rail with "no restrictions on the minimum/maximum amount". IMPS is instant too, but option (d) misstates it: MMID is needed only for mobile banking; through internet banking IMPS uses account number and IFSC.
3.What does the booklet say about using UPI in the ASBA process when applying in a public issue?
- a)UPI can be used only to receive refunds after allotment
- b)UPI can be used only by investors who hold a trading account
- c)UPI may be used to block funds and make payments in a public issue; the investor creates a UPI ID and PIN in a UPI-enabled mobile app, and it reduces the listing time
- d)UPI replaces ASBA, so the money leaves the account on the day of application
Show the answer
Answer: (c) UPI may be used to block funds and make payments in a public issue; the investor creates a UPI ID and PIN in a UPI-enabled mobile app, and it reduces the listing time
The booklet: "A new feature of utilizing Unified Payment Interface (UPI) while making payment in ASBA, has also been introduced recently. This feature may be used for the purpose of blocking of funds and making payments in the public issue process. This requires the investors to create a UPI ID and PIN using any of the UPI enabled mobile application. Usage of UPI in public issue process brings in comfort, ease of use and reduces the listing time for public issues."
Recall what ASBA is: Application Supported by Blocked Amount — the application money is blocked in your own bank account, keeps earning interest, and is debited only if you get an allotment.
Why the other options are wrong:
- Option A — UPI is used for blocking funds and making payments, not only for refunds. With ASBA there are no refunds to wait for; unused blocked money is simply released.
- Option B — the booklet sets no such condition; it needs a UPI ID and PIN from a UPI-enabled app.
- Option D — UPI works inside ASBA. The money is blocked, not taken away, until allotment.
Where this is taught
Free preparation for NISM Series SEBI-ICERelated terms
- ASBAThe mandatory payment mechanism for public and rights issues, in which your bank blocks the application money in your own account and debits it only if you actually get an allotment.
- NEFTNational Electronic Funds Transfer — a nation-wide system that moves money between bank accounts in batches, round the clock, with no RBI-imposed amount limit; a standard route for mutual fund purchases and pay-outs.
- RTGSReal Time Gross Settlement — electronic transfer in which funds move from one bank to another immediately, used for transactions above Rs 2 lakh with no upper ceiling.
- Primary marketThe market where an issuer sells securities to investors for the first time and receives the money itself — the "new issue market", as against the secondary market where investors trade among themselves.
- IMPS — Immediate Payment ServiceAn instant electronic fund transfer between two bank accounts, usable through internet banking with an IFSC code or through mobile banking with a 7-digit MMID.
- MMID — Mobile Money IdentifierA 7-digit number a bank issues to its customer, needed — along with a mobile number — to receive money through IMPS mobile banking.
- NACHNational Automated Clearing House — NPCI's centralised electronic clearing system for repetitive payments, which replaced ECS and now carries SIP debits and dividend and redemption credits.
- UPI block facilitySecondary-market trading in which the client's money stays in their own bank account, blocked in favour of the clearing corporation through a UPI single-block-multiple-debit mandate.