The RBI’s Monetary Policy Committee (MPC) has proposed to make cardless cash withdrawal facility available at all ATMs, irrespective of banks, through the Unified Payment Interface (UPI).

What is UPI?

• UPI is an instant real-time payment system developed by National Payments Corporation of India (NPCI) facilitating inter-bank transactions.
• The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.

How will cash withdrawals via UPI work?

• While the RBI did not disclose specific details on how the process will work, a person having knowledge about the matter said ATMs soon will show an option to withdraw cash using UPI.
• Upon selecting that option, a user would have to add the amount they wish to withdraw following which a QR code would be generated on the ATM machine.
• The user would then have to scan that code on their UPI app and enter their pin following which the ATM will dispense cash.

Why such move?

• Allowing cash withdrawals through UPI would increase the security of such transactions.
• The absence of the need for physical cards for such transactions would help prevent frauds such as card skimming and card cloning, among others.

What are the current ways of cardless cash withdrawals at ATMs?

• At the moment, a few banks such as ICICI Bank, Kotak Mahindra Bank, HDFC Bank and SBI, allow their users to withdraw cash from their ATMs without a card.
• This was a feature introduced in the wake of the Covid-19 pandemic.
• However, it is a long-drawn process.
• Users have to install apps of their respective banks and first select the option of cardless cash withdrawal on the app, followed by adding beneficiary details and the withdrawal amount.
• After confirming the mobile number of a user, the bank will send an OTP and a nine-digit order ID to the beneficiary’s phone.
• Post that, the beneficiary would have to visit an ATM and key-in the OTP, order ID, amount for transaction and mobile number to get the cash.

Could this impact debit card usage?

• Debit cards are currently the most popular way of cash withdrawals at ATMs.
• As of now, there are more than 900 million debit cards in the country, and experts have cautioned that allowing cash withdrawals through UPI could negatively impact debit card usage.
• There could be a potential first-order impact on debit cards as this step would reduce the need to carry debit cards.

What’s next in the UPI pipeline?

• It is projected that in the next 3-5 years, UPI would be processing a billion transactions a day, and to enable that, a number of initiatives have been introduced.
• Chief among these is UPI’s AutoPay feature, which has already seen increased adoption owing to RBI’s disruptive guidelines on recurring mandates.
• According to industry experts, the AutoPay feature will be crucial to increasing daily transactions on the platform.
• The RBI has also announced UPI123 on feature phones without an Internet connection, which is expected to open up the payments system to more than 40 crore individuals who use such devices.
• This will expand digital financial inclusion and add to the number of transactions made on the platform.

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