The heat is on
India’s retail payments star, the UPI service, has been feeling the heat as it faced a series of disruptions in the past few weeks. Since its launch in April 2016, UPI has been steadily gaining in popularity, processing Rs. 24.77 trillion across 19.78 billion transactions last month, the highest ever in volume and value. The system started to face cracks and transaction failures, with the outage on April 12th lasting around five hours. As Pratik Bhakta reported, UPI transactions in the beginning of April had surged to more than 600 million per day, considerably higher than the usual volume of around 500 million. NPCI met with major payment providers and Ajinkya Kawale has reported on NPCI’s analysis and the proposed steps ahead. While there are a number of problems to be addressed for strengthening the service, including fluctuations in telecom networks and technical issues involving software-defined wide area networks (SD-WAN) failures, one critical factor identified was the excessively high number of ‘Check Transaction Status’ API calls by banks, which strain the system during peak usage.
Even as the NPCI and the banks work on these technical problems, there are some fundamental issues that cannot be swept under the rug anymore. As Arundhati Ramanathan has pointed out, “UPI has become the very thing that NPCI hates – a payments monopoly!” Till recently, UPI has had an excellent track record of 100 percent uptime, but service levels in payments systems have to be near perfect, especially in the case of a monopoly – if the system reaches capacity and breaks, users have nowhere else to go. The concentration risk in the payments system remains a serious problem for RBI. Meanwhile at the other end there is capacity building, where there is an overdue issue that payment providers have been calling out - rising pressures of investment in infrastructure upgrades. How long can the government insist on keeping UPI free, with subsidy only for low value payments? Ateesh Tankha did a deep dive into the numbers and also explains why users will not reject charges. While Srinath Shridharan bats for keeping UPI free, read Anand J on the rationale behind the policy stance and the view from the industry. From Indicus, we do feel that the government must change its stance. Rather than go the subsidy route and giving a pittance to the industry, the channels for discussion must be opened, as suggested by the RBI in 2022, to allow reasonable charges/MDR, which will benefit both consumers and providers.
The current heatwaves in the country have also brought to the fore the link between climate and financial inclusion. Sitara Merchant Carter and Azalea Carisch have explained how financial service providers can address climate related health risks, with innovative solutions for vulnerable low-income segments. The report released earlier this year by Swiss Capacity Building Facility highlighted the pioneering parametric insurance plan piloted by SEWA in 2023. In response to feedback from the participants, dual peril coverage has been designed for SEWA members this year covering extreme heat and excess rainfall. When it comes to experiences at the grass roots, do also read about MicroSave’s work with tribal communities using a toolkit which blends local climate adaptation strategies into financial services including microfinance.
For the RBI, here is one more reminder for granular data on financial inclusion, with emphasis on gender and geography. The National Bank of Rwanda has set up a national financial inclusion dashboard updated weekly. CGAP’s Sophie Sirtaine and NBR Governor Soraya Munyana Hakuziyaremye explained this initiative. The dashboard has district level data with multiple indicators like insurance, transactions, savings, credit and so on across various cuts including status of account, gender etc. From Indicus we have been committed to this message for years - a dashboard like this for India, updated quarterly, would provide transparency for financial service providers and policy makers towards appropriate policies, products and services.
Finally, our two must-read pieces this month: a) C.S. Mohapatra and Depannita Ghosh have highlighted a very important emerging challenge for financial inclusion - our senior citizens, who are dealing with increasing digitization of basic services, and b) Sasidhar Thumuluri has a Linkedin post on the current microfinance crisis in India.
Do read more news and views in our curated list below. Please also follow our Indicus Centre for Financial Inclusion page on Linkedin to continue the conversation.
Amol Kapoor’s Linkedin post on Uttar Pradesh’s Climate Smart Gram Panchayat Action Plan, a practical toolkit that helps over 58,000 Gram Panchayats map their climate risks, emissions, and local adaptation strategies.
RBI Deputy Governor T Rabi Shankar spoke on the crucial role fintech firms have in fostering financial inclusion.
Leena Datwani and Catherine Highet, CGAP, write on the experiences of Avanti Finance as a digital-first MFI built for scale.
Fintech Association for Consumer Empowerment (FACE) and D91 Labs released a report “State of Alternative Data in India – The Lending Use-Case”, showing how digital lenders are using mobile data, SMS records, and GST transaction histories to bridge the credit gap for underserved and new-to-credit (NTC) borrowers.
Mithilesh Jha, Financial Express, examines the trend of young Indians defaulting on small loans.
Ajinkya Kawale, Business Standard, reports on the rebranding of DLAI as Unified Fintech Forum, as it pursues its bid to be SRO for the fintech industry.
Ram Rastogi writes on the Reserve Bank of India (Co-Lending Arrangements) Directions, 2025.
Mitul Thapliyal and Anant Jayant Natu, MicroSave Consulting, look into Odisha’s Smart Payment System pilot that shows how real-time, automated fund disbursement can enhance governance, reduce delays, and improve last-mile delivery.
Sugata Ghosh, Economic Times, flags a money laundering issue where some BCs are exploiting bank loopholes.
Subhash Garg writes in Deccan Herald on fixing UPI.
Prasanna Tantri, Indian School of Business, argues that while the RBI’s efforts to standardise loan terms and prevent evergreening are in the right direction, treating banks more favourably than non-banks is likely to be counterproductive.
Raghu Mohan, Business Standard, writes on the fintech funding slowdown.
Sophie Sirtaine, CGAP, writes on AI's promise for financial inclusion.
Anil Kumar Gupta, MicroSave Consulting, writes on the Pradhan Mantri Mudra Yojana, its successes and recommendations on enhancing its potential.
Sumita Kale, ICFI, gave a TEDx talk to students at Gokhale Institute of Politics and Economics, connecting the dots between climate change and financial inclusion.