The Reserve Bank of India’s (RBI) proposal to introduce a one-hour delay for processing transactions above Rs 10,000 to new payees has triggered concern across the financial ecosystem, with bankers and fintech players warning of potential disruption to digital payments, as reported by Moneycontrol.
Cure worse than the disease?
Several industry executives remain sceptical about the proposal’s effectiveness in tackling fraud. A senior banker heading digital payments operations reportedly said that the measure risks doing more harm than good.
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The banker said the proposal resembles a situation where “the cure is worse than the disease", adding that instead of introducing friction, authorities should focus on identifying and penalising fraudsters. The concern is that such a delay could reportedly dilute one of the biggest strengths of India’s payments ecosystem, real-time transactions.
Impact may be limited
The Central bank’s discussion paper does provide certain exemptions, noted Moneycontrol. Transactions involving registered merchants will not face delays, and payments to previously added payees will continue without restrictions.
Users will also reportedly have the option to whitelist trusted beneficiaries, allowing them to bypass the time lag.
Despite these relaxations, industry participants believe the broader impact on user experience cannot be ignored.
The UPI ecosystem is to be drastically affected
While the proposal applies to digital payments at large, it is expected to impact the Unified Payments Interface more significantly than other modes, according to stakeholders quoted by Moneycontrol.
Traditional systems such as IMPS and NEFT already involve additional steps like entering bank account numbers and IFSC codes, which naturally introduce a level of friction. In contrast, UPI’s simplicity and speed have been key to its widespread adoption.
Usage ease under risk
Raj P Narayanam, founder and executive chairman of Zaggle, told Moneycontrol that UPI’s success has been driven by its ability to enable seamless, high-value first-time transactions.
