Banking with UPI 2.0

This feature allows the user to preauthorise a payment and initiate a debit later

The wait is over. The long-awaited upgraded version of the unified payments interface (UPI) is here. The National Payments Corporation of India (NPCI) launched the second version of UPI — the UPI 2.0 on August 16. To start with, 11 banks have partnered to offer the second version. It includes the State Bank of India, ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, YES Bank, IDBI Bank, Federal Bank, RBL Bank, HSBC and IndusInd Bank. Five new features have been introduced in the second version of UPI. We analyse them.

One-time mandate

This feature allows the user to preauthorise a payment and initiate a debit later. It has to be digitally signed and the information is stored at the payer’s bank and with his/her UPI app-providing bank. Once the payer makes the payment, the digital signature and other parameters are verified and debit transaction is completed from the payer’s account. But remember, this feature is allowed only for a P2M (person-to-merchant) transaction and not for P2P (person-to-person) transaction.

Once the mandate is given, the equivalent amount will be blocked instantaneously in your account. So, there will be two components to your total balance — available balance and actual/usable balance. The mandate will have parameters such as purpose code, from and to dates (these define the period for which the mandate is valid), amount and frequency (set as one time). Modification and revocation of the mandate may or may not be allowed, depending on specific cases. If allowed, the modifications in the mandate should be done within the specified period and revocations prior to the expiry date of the mandate. The money blocked in your account will be released immediately if the mandate is not executed, until the expiry or revoked date.

In a way, this feature is similar to the process of applying for an initial public offering where the funds will be blocked at the time of applying and the account will be debited if the allotment is done.

The difference between this feature and the standing instruction option available in the net banking facility is that, in the case of net banking, the debit happens automatically at the specified time and the money is not blocked. The individual has to be cautious about retaining the balance in the account, whereas the one-time mandate (OTM) blocks the amount immediately and the amount will be debited only when the mandate is executed.

Linking the OD account


UPI 2.0 now allows users to link their overdraft (OD) account in addition to the savings and current accounts that were allowed in the first version. UPI will act as a digital channel to access the OD account. The user has the option of setting up a new UPI ID and Pin or using the existing credentials to which the current or savings account is linked. Both P2M and P2P transactions are allowed if the OD account is secured. Only P2M transaction is allowed if you have a linked unsecured OD account. The feature to link the OD account is a benefit, especially for merchants, as it gives them the provision to use additional capital. But one should remember that the money used from the OD account will come at a cost, as interest has to be paid. Also, the money has to be repaid within the specified time.

Invoice in inbox

This feature gives merchants a provision to share the invoice with their customers before the actual payment is made. The invoice is shared through a secured link as a message or as an attachment. The customer can then use the link to verify the details of the invoice by clicking the link in the message or opening the attachment.

At the moment, this facility is available only for verified merchants and it is necessary for them to maintain the record of historical transactions — the links of the invoices for at least two months.

Additional security

Signed intent and quick response (QR) code will be additional security features that have been added in version two of the UPI. This will allow the customer to verify the payee details before making the transaction.

Last but not the least, the per transaction limit has been doubled from ₹1 lakh to ₹2 lakh in UPI 2.0.

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