Explainer - Payment Systems in India

• The Reserve Bank of India (RBI) published the half-yearly Payment System Report, December 2025 on May 18. 

• The report analyses the trends in payment transactions carried out using various payment systems in India during the last five calendar years up to the second half of the calendar year 2025.

• India’s digital payments ecosystem has witnessed impressive expansion, with transaction volumes surging 33 times and values rising by almost three times over the 10-year period 2016 to 2025. 

• This reflects the nation’s rapidly expanding digital landscape, driven by ubiquitous smartphone penetration, transformative public infrastructure such as the Unified Payments Interface (UPI), and growing public trust in secure, seamless cashless transactions.

• In the second half (H2) of Calendar Year (CY) 2025, the UPI commanded the largest share of transaction volume at 85.5 per cent. It was followed by National Electronic Funds Transfer (NEFT) at 3.6 per cent and Prepaid Payment Instruments (PPIs) at 3.6 per cent, while Real Time Gross Settlement (RTGS) accounted for a mere 0.1 per cent.

• However, in terms of transaction value, RTGS dominated with 68.6 per cent of the total transaction value, followed by NEFT at 14.9 per cent and UPI at 9.5 per cent, with PPIs contributing only 0.1 per cent. 

• It clearly shows RTGS handles large-value settlements while UPI drives mass retail transactions.

Payment Systems in India

• A robust, adaptive, and inclusive payment infrastructure delivering secure, affordable, and user-centric payment instruments across segments not only serves as an engine for economic advancement but also supports financial inclusion. 

• In India, the Payment and Settlement Systems Act, 2007 constitutes the foundational legal architecture governing the regulation and oversight of payment and settlement mechanisms. 

• Under this Act, the RBI is vested with the powers to authorise, regulate, and supervise payment systems and their operators.

• The Payments Regulatory Board (PRB) is the body for regulation and supervision of payment systems. 

• PRB was constituted on May 9, 2025, replacing the erstwhile Board for Regulation and Supervision of Payment and Settlement Systems (BPSS). The first meeting of the PRB was held on January 5, 2026.

• India’s payment infrastructure has evolved into a dynamic, multi-layered ecosystem that caters to diverse user needs — from rural communities to urban tech-savvy consumers. 

• The payments landscape encompasses traditional instruments like cheques and demand drafts as well as a robust suite of digital payment systems.

• These systems collectively offer users seamless, secure, and convenient payment options — fostering financial inclusion, accelerating digital adoption, and supporting India’s transition toward a cash-lite economy.

Payment Systems Instruments

1) Real Time Gross Settlement (RTGS)

• Launched in 2004, RTGS is a large-value payment system operated by the RBI. It facilitates the real-time settlement of funds on a gross basis, available 24x7. RTGS is primarily used for high-value transactions, ensuring speed, finality, and security. 

• RTGS transactions volume grew from 20 crore in CY 2021 to 33 crore in CY 2025, while transactions value increased from Rs 1,246 lakh crore to Rs 2,206 lakh crore during this period. This reflects a CAGR of 13.5 per cent in transaction volume and 15.3 per cent in transaction value.

2) National Electronic Funds Transfer (NEFT)

• NEFT system is a nationwide, centralised electronic payment platform operated by the RBI. It enables fund transfers between bank accounts across the country. Although there is no upper limit imposed by the RBI for funds transfer through NEFT system, a member bank may, with the approval of its Board, place such limit based on its own risk perception. This is because NEFT is primarily used for low and medium-value transactions, unlike RTGS, which is designed for high-value payments. NEFT processes transactions in half-hourly batches, starting at 00:30 hours, with the last batch processed at 23:30 each day. It is widely used for one-to-one fund transfers across banks in India. 

• During the period CY 2021 to CY 2025, NEFT transactions nearly tripled in terms of volume, from 380 crore to 1,000 crore. However, over the same period, in terms of value, they grew from Rs 277 lakh crore to Rs 482 lakh crore. This translates into a CAGR of 27.4 per cent and 14.9 per cent in volume and value respectively during this period.

3) National Automated Clearing House (NACH) 

• The National Automated Clearing House (NACH) is a system run by the National Payments Corporation of India (NPCI) that helps banks automatically handle large number of payments and collections. 

It facilitates two types of transactions. 

i) NACH Credit - One debit and multiple credits and includes payment of salaries, pensions, interest, subsidies, and dividends. 

ii) NACH Debit - Multiple debits and once credit and includes payment of electricity bills, loan EMIs, and insurance premiums. 

• NACH Credit also covers payment transactions including government’s Direct Benefit Transfer (DBT) payouts, while DBT-related transactions are processed through the Aadhar Payment Bridge (APB) system. On the other hand, collection-based transactions fall under NACH Debit.

• The volume of NACH transactions (both Credit and Debit) rose from 400 crore in CY 2021 to 742 crore in CY 2025. During the same period, the value of NACH transactions also rose from Rs 23 lakh crore to Rs 51 lakh crore. This translates into a CAGR of 16.7 per cent in volume and 21.5 per cent in value, reflecting sustained and accelerating adoption. 

• While NACH Credit transactions grew at a CAGR of 15.8 per cent in volume and 17.02 per cent in value, reflecting the platform’s important role in bulk disbursements, NACH Debit transactions have shown even more vigorous expansion, with a CAGR of 19.3 per cent in volume and 27 per cent in value, indicating rising consumer reliance on automated, recurring payments for utilities, EMIs, subscriptions, and other regular obligations.

4) Immediate Payment Service (IMPS)

• IMPS is a fast payment system introduced by NPCI, offering 24x7 instant fund transfer through multiple channels including mobile banking, internet banking, and ATMs. It enables real-time credit to beneficiaries’ accounts and supports both person-to-person and person-to-merchant transactions.

• The individual transaction limit under IMPS is Rs 5 lakh across all channels, except for SMS and Interactive Voice Response (IVR). IMPS transactions volume rose from 434 crore in CY 2021 to 518 crore in CY 2025. More notably, transaction value doubled during the same period from Rs 38 lakh crore to Rs 75 lakh crore. This translates into a CAGR of 4.5 per cent in in volume and 18.1 per cent in value.

• The average transaction size under IMPS is higher than that of UPI, which indicates that users typically prefer IMPS for medium to large-value transfers, while UPI is more commonly used for small to medium-value transactions.

5) Unified Payments Interface (UPI)

• Launched in 2016, UPI has transformed digital payments in India and emerged as one of the fastest-growing payment platforms globally. Developed and managed by NPCI, UPI enables real-time interbank transfers through mobile devices. Innovations such as UPI 123Pay (for feature phones), Hello UPI (voice-enabled payments), UPI-ATM (cardless cash withdrawals), Credit Card on UPI, and UPI Circle have significantly expanded its functionality and accessibility.

• The volume of UPI transactions has increased significantly from 3,873 crore transactions in CY 2021 to 22,828 crore transactions in CY 2025. The total value of transactions grew from Rs 72 lakh crore in CY 2021 to Rs 300 lakh crore in CY 2025. The CAGR of the UPI transaction during this period is 55.8 per cent in terms of volume and 43 per cent in terms of value. 

• As UPI is mainly used for small value transactions, the average ticket size of such transactions remains low. From Rs 1,848 in CY 2021, the average ticket size of UPI transactions declined further to Rs 1,313 in CY 2025.

6) Card Payments

• Card-based payments form a significant segment of India’s retail payment systems. Transactions are facilitated through debit cards, credit cards, and Prepaid Payment Instruments (PPIs). Debit cards are primarily issued by banks, while credit cards are issued by both banks and a few Non-Banking Financial Companies (NBFCs). PPI cards can be issued by banks as well as authorised non-bank PPI entities. RuPay is India’s indigenous domestic card network, offering an affordable and secure card payment infrastructure.

• As of December 2025, there were 115.01 crore outstanding cards in India, including 11.58 crore credit cards and 103.43 crore debit cards.

• Credit card transactions have seen an upsurge over the years. Transaction volume increased from 216 crore in CY 2021 to 570 crore in CY 2025 while transaction value rose from Rs 8.9 lakh crore to Rs 23.2 lakh crore during the same period. This translates into a CAGR of approximately 27 per cent for both volume and value.

• Transactions in debit cards have witnessed a decline since 2021, both in volume and value. In volume terms, debit card transactions declined from 408.7 crore in CY 2021 to 133.6 crore in CY 2025, while in value terms, they declined from Rs 7.4 lakh crore to Rs 4.5 lakh crore during this period. 

• The decline in debit card transactions, both in volume and value, is potentially driven by the rise of digital wallets, UPI, and credit card adoption.

• While credit cards are being increasingly used for online purchases and credit access, debit cards are mostly being used for cash withdrawals and basic transactions. Both instruments, however, face growing competition from digital alternatives.

• Prepaid Payment Instruments (PPIs) are instruments that facilitate the purchase of goods and services, enable financial services, and support fund transfers against the value stored within them. PPIs may take the form of mobile wallets or cards.

• PPIs continue to play a versatile role in digital transactions. While PPI transaction volume rose from 620 crore in CY 2021 to 918 crore in CY 2025, transaction value remained almost at the same level of Rs 2.65 lakh crore during this period. The issuance of PPIs also grew from 151 crore instruments (125 crore wallets and 26 crore cards) in December 2021 to 209 crore (162 crore wallets and 47 crore cards) in December 2025.

7) Cheque Truncation System (CTS)

• The CTS, implemented by the RBI and operated by NPCI, is a mechanism of cheque clearing, which eliminates the physical movement of cheques, replacing it with the secure electronic transmission of high-resolution cheque images and structured data. More than 60 crore cheques with a value of approximately Rs 70 lakh crore are cleared through CTS every year. 

• With the objective of making cheque clearing faster and reducing settlement risks, Continuous Clearing and Settlement on Realisation was implemented in CTS on October 4, 2025. Under this, cheques are scanned, presented, and passed on a continuous basis during the presentation and confirmation sessions. Cheques that are positively confirmed are included for settlement while negatively confirmed (dishonoured) cheques are not. Banks are required to credit customer accounts within one hour of settlement.

• The CTS transaction volume declined from 72 crore in CY 2021 to 57.2 crore in CY 2025. However, the transaction value increased from Rs 66.03 lakh crore to Rs 70.82 lakh crore during the same period. The average transaction size increased from about Rs 92,000 to Rs 1.24 lakh.

8) Bharat Bill Payment System (BBPS)

• The BBPS is an RBI-mandated system that offers a reliable, secure, and integrated platform for bill payments across the country. It facilitates convenient, real-time payment of various utility bills such as electricity, water, gas, telecom, DTH, and more through multiple channels, including bank branches, mobile apps, ATMs, and agent outlets. The system ensures transparency and immediate confirmation of transactions. BBPS is operated by NPCI Bharat BillPay Ltd (NBBL), a wholly owned subsidiary of NPCI. 

• The number of billers grew from 20,400 in December 2021 to 22,600 in December 2025. The growth of BBPS has been remarkable, with transaction volume rising almost six-fold from 56 crore in CY 2021 to 305 crore in CY 2025. Transaction value rose 16 times from Rs 0.96 lakh crore to Rs 14.8 lakh crore over the same period.

• A recent enhancement to BBPS includes a cross-border bill payment facility that allows Non-Resident Indians (NRIs) to pay utility, education, and other bills in India on behalf of their families, thereby broadening the system’s reach and utility.

9) National Electronic Toll Collection (NETC)

• The NETC system provides a unified and interoperable toll payment solution across India. Operated with clearinghouse services for settlement and dispute management, NETC streamlines toll collection through FASTag, a device based on Radio Frequency Identification (RFID) technology. Affixed to a vehicle's windscreen, FASTag enables automatic toll payments directly from the linked payment account while the vehicle remains in motion, thus reducing congestion and enhancing efficiency at toll plazas.

• NETC (linked to bank account) transaction volume rose from 11 crore in CY 2021 to 17 crore in CY 2025. In value terms, these transactions grew from Rs 1,534 crore to Rs 2,189 crore during the same period. This translates into a CAGR of 11.2 per cent in volume and 9.3 per cent in value.

• NETC infrastructure has expanded rapidly. The number of toll plazas onboarded increased from 964 in December 2021 to 1,896 in December 2025. FASTag issuance grew from 4.42 crore to 11.87 crore during this period.

10) Aadhaar-enabled Payment System (AePS)

• AePS was introduced in 2011 to promote financial inclusion. AePS is a bank-led model that facilitates online interoperable financial inclusion transactions at Point of Sale (Micro ATM) terminals through Business Correspondents of banks, using Aadhaar authentication. The banking services offered under AePS include cash deposit, cash withdrawal, balance enquiry, mini statement, Aadhaar-to-Aadhaar fund transfer, and BHIM Aadhaar Pay. Additional services include e-KYC, Best Finger Detection (BFD), and biometric authentication etc.

• The Unique Identification Authority of India (UIDAI) provides biometric verification services, while the National Payments Corporation of India (NPCI) handles the switching, clearing, and settlement of transactions under the AePS framework.

• The volume of transactions conducted through AePS (fund transfers) and BHIM Aadhaar Pay increased from 212 lakh in CY 2021 to 231 lakh in CY 2025. The corresponding value of these transactions rose from Rs 5,697 crore to Rs 7,422 crore over the same period.