India’s most-used digital payment system, the Unified Payments Interface (UPI), which handles around 7,000 transactions per second and over 4 lakh per minute, has faced four outages in just 20 days—raising serious questions about the resilience of the system and sparking a call for alternative frameworks.
On April 12, UPI saw its second major outage in less than three weeks. A similar issue occurred on March 26. Two smaller, isolated incidents were also reported, likely caused by year-end load on banking infrastructure.
Fintech executives and digital banking heads are sounding alarms, pointing out that with over 40 crore users and 83% of digital payments routed through UPI, even a 10-minute downtime halts nearly 24 lakh merchant transactions. Around 65% of UPI payments are merchant-related, highlighting its central role in Indian commerce—from bill payments to IPOs and daily retail sales.
A senior digital banking executive noted, “Many Indians don’t carry wallets anymore. If UPI fails, commerce pauses.”
Though NPCI (National Payments Corporation of India), which manages UPI, targets 1 billion daily transactions, recent outages occurred even on days with moderate traffic. For example, on April 12, when the system failed, only 550 million transactions were processed—lower than the 620 million on prior stable days.
Experts suggest the strain on Core Banking Systems (CBS) of major banks like SBI and HDFC could be the cause. Notably, 86% of UPI transactions are below ₹500, and CBS was never designed to handle 500 million+ microtransactions daily.
Technical Declines (TD)—when a transaction fails due to server or tech errors—remain a key metric. While private banks maintain low TDs (<0.1%), SBI recorded 0.9% in March, higher than many other public banks, affecting the ecosystem’s overall performance.
Despite NPCI’s introduction of UPI Lite—a feature aimed at offloading small-ticket payments—its adoption remains minimal at 25–30 lakh transactions/day, offering limited relief.
According to policy researcher Dr. Srinath Sridharan, the situation underscores the need to revisit the New Umbrella Entity (NUE) proposal—not to replace NPCI, but to add redundancy and foster competition. Though the RBI put NUE plans on hold due to a lack of innovation, fintech leaders believe it’s time to revisit it for system resilience.
Others call for alternate CBS infrastructure, better fallback systems, and broader TPAP (Third-Party App Provider) diversification—especially with the 30% cap on UPI market share for platforms like PhonePe and Google Pay now extended to December 31, 2026.
“The goal must be clear: build a digital payment backbone rooted in competition, contingency, and continuity,” Sridharan added.