# Payments & Digital Finance: RTGS vs NEFT, UPI Abroad, Digital Rupee, ONDC & PM Mudra (UPSC Economy) Source: https://tracknation.in/story/payments-digital-finance-rtgs-vs-neft-upi-abroad-digital-rupee-ondc-pm-mudra-upsc-economy (TrackNation β€” free UPSC notes with PYQs) > India's payments stack for UPSC β€” the Payment and Settlement Systems Act, NPCI and the rails (RTGS, NEFT, IMPS, UPI, RuPay), UPI's expansion to eight countries, Account Aggregator, ONDC and TReDS, the Digital Rupee pilot (82 lakh users) and how it differs from UPI and crypto, and the inclusion schemes PMJDY, MUDRA, Stand-Up India and PM SVANidhi with 2025 numbers β€” with practice questions and real PYQs. ## India's Payment Architecture: RBI, NPCI and the Rails 🎯 **Exam priority: Important.** *UPSC has moved from "what is UPI?" to precise comparisons β€” RTGS vs NEFT (2025), UPI vs the Digital Rupee, ONDC's purpose, TReDS (2026) β€” and to which countries accept UPI. Know each system's defining feature and the latest numbers.* India's payment system is a stack of public rails that private firms build on. Understanding the layers is the key to every question in this area. ## Who runs what - The **Payment and Settlement Systems Act, 2007** makes the **RBI** the regulator of payment systems (through its Board for Regulation and Supervision of Payment and Settlement Systems). **NPCI β€” the National Payments Corporation of India** (2008, set up by the RBI and the Indian Banks' Association as a not-for-profit umbrella entity) *operates* the retail rails; **NIPL** is its international arm. - NPCI products: **UPI, IMPS, RuPay, BHIM, BBPS** (Bharat Bill Payment System), **NACH, AePS** (Aadhaar-enabled payments), **NETC/FASTag**. The RBI itself runs the large-value rail **RTGS** and the batch rail **NEFT**. - **Payment aggregators, prepaid instruments (wallets) and payments banks** are licensed by the RBI; non-bank wallets and aggregators are the layer where fintech firms operate. ## The rails compared | **System** | **How it works** | **Key facts** | | **RTGS** (Real Time Gross Settlement) | Each transaction settled individually and **instantaneously** in the RBI's books | **Minimum β‚Ή2 lakh** (no maximum); available **24Γ—7** since December 2020; no charge for *inward* credit | | **NEFT** (National Electronic Funds Transfer) | Transactions settled in **batches** (deferred net settlement) | No minimum or maximum; **24Γ—7** since December 2019; inward credit is free | | **IMPS** (Immediate Payment Service) | Instant interbank mobile/internet transfers, 24Γ—7 | Operated by NPCI; predecessor to UPI | | **UPI** (Unified Payments Interface) | Real-time payments through a virtual payment address (VPA) or QR, over IMPS; one app can link many bank accounts; collect and pay requests | Launched April 2016; **interoperable**; standard limit β‚Ή1 lakh per transaction (higher for notified categories); UPI Lite for small payments; UPI 123PAY for feature phones | | **RuPay** | India's domestic card network | Operated by NPCI; competes with Visa/Mastercard | - UPSC's 2025 RTGS/NEFT question checked three claims: settlement is instantaneous in RTGS but takes time in NEFT (**true**); customers are charged for inward transactions in RTGS but not NEFT (**false** β€” inward credit is free in both); RTGS hours are restricted on certain days while NEFT's are not (**false** β€” both run round the clock). ## UPI, Account Aggregator, ONDC, TReDS and Digital Public Infrastructure UPI is the best-known piece of India's **Digital Public Infrastructure (DPI)** β€” open, interoperable systems built by the state that private firms build on. ## UPI, Account Aggregator, ONDC, TReDS - **Economic effects (Survey box III.5):** UPI turns bank accounts into *active* financial participation by generating verifiable transaction histories, helping lenders reach new-to-credit borrowers without higher defaults. A 2025 survey of 4,800 respondents in Maharashtra and Bihar found that **nearly 80% of UPI users use it for three or more purposes** β€” but **over 90% still use cash regularly**: digital payments complement cash rather than replace it. - **UPI abroad:** NIPL has linked UPI to other countries' fast-payment systems. The Ministry of Finance's 2025 review says UPI acceptance at merchant locations is live in **Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka and the UAE**, and that **Qatar** became the **eighth** live country in 2025 (a new link also covers e-commerce and QR payments in Singapore). Germany and Bangladesh were not among them β€” the point UPSC tested in 2025. - **Account Aggregator (AA) framework** (RBI-regulated NBFC-AAs, since 2021): lets people share their financial data β€” bank statements, GST returns, insurance β€” with lenders through *consent*, enabling digital lending. An industry self-regulatory organisation for AAs received in-principle approval in 2025. - **ONDC β€” Open Network for Digital Commerce** (DPIIT, 2022): an open, interoperable protocol network that lets buyers and sellers on different apps transact with each other, so the market is **not dominated by a few large e-commerce platforms** (UPSC 2026: the correct objective is to break platform dominance through interoperability β€” not to replace private players or give the government control). - **TReDS β€” Trade Receivables Discounting System**: RBI-authorised electronic platforms (RXIL, M1xchange, Invoicemart) on which **MSME sellers get invoices and bills of exchange discounted** by financiers against corporate buyers. They provide *invoice discounting*, not collateral loans and not credit rating (UPSC 2026). - **e-RUPI** (2021) is a prepaid, purpose-specific voucher delivered by SMS/QR; **BBPS** is the interoperable bill-payment platform; **FASTag** (NETC) is the RFID toll payment system, mandatory for M and N category vehicles since 1 January 2021. - **Blockchain and tokenisation (2026 PYQs):** a blockchain is a distributed ledger replicated across many computers, where recorded data is made practically immutable by cryptography; permissioned/consortium chains give selective access. **Real-World Asset (RWA) tokenisation** turns claims on real assets into digital tokens on a blockchain, enabling 24Γ—7 trading and fractional ownership. ## The Digital Rupee (CBDC): UPI vs eβ‚Ή vs Crypto The Digital Rupee is the RBI's digital banknote. UPSC's 2026 question made students separate it from UPI β€” and from crypto. ## CBDC β€” eβ‚Ή - A **Central Bank Digital Currency** is the digital form of legal-tender currency, issued by the central bank, a **direct liability of the RBI** (like a banknote) β€” unlike UPI balances, which are claims on commercial banks. The RBI launched **two pilots in late 2022**: **wholesale (CBDC-W)** for interbank/G-secs settlement (November 2022) and **retail (CBDC-R)** for the public (December 2022). - **2025 status (Ministry of Finance review):** the retail Digital Rupee pilot has expanded nationwide to **82 lakh users and 11 lakh merchants** (November 2025); it is **interoperable with UPI** (users can scan any UPI QR); **programmable CBDC** pilots were run for selected Direct Benefit Transfer schemes; **offline CBDC** (payments without internet) is under test; the wholesale pilot has settled government securities and call-money transactions; and the RBI is working with the BIS Innovation Hub on cross-border CBDC projects. | **Feature** | **UPI** | **Digital Rupee (CBDC)** | | What it is | A **payment system** moving commercial-bank money | **Money itself** β€” legal tender, digital banknote | | Liability | Commercial bank (the money stays in bank accounts) | **RBI** | | Settlement | Interbank settlement between banks (net, near real-time) | Wallet-to-wallet transfer with **no bank settlement** step for the end user | | Record | Appears in bank statements | Wallet transfers; no bank-statement entry for wallet-to-wallet moves | | Interest | Underlying deposit may earn interest | None (cash-like) | ## CBDC vs cryptocurrency - Private **cryptocurrencies** (Bitcoin) are not issued or backed by any central bank, not legal tender in India and not a currency under RBI's recognition; gains are taxed as **virtual digital assets (30% tax, 1% TDS)**. A CBDC is the opposite: sovereign-issued, stable in value and fully regulated. Stablecoins and tokenised assets are a separate policy debate. ## Financial-Inclusion Schemes: PMJDY, MUDRA, Stand-Up India, SVANidhi Payments rails are only useful if people have accounts and credit. India's financial-inclusion drive has three layers: accounts, credit, and digital access. ## Financial inclusion schemes | **Scheme** | **Launched** | **What it does** | **Numbers (Economic Survey 2025-26)** | | **PM Jan Dhan Yojana (PMJDY)** | 2014 | Zero-balance basic savings accounts with RuPay debit card and accident insurance | **55.02 crore accounts** by March 2025, 36.63 crore in rural/semi-urban areas | | **PM MUDRA Yojana (PMMY)** | April 2015 | Collateral-free loans to micro/small enterprises β€” 'fund the unfunded'. Tiers: **Shishu** up to β‚Ή50,000; **Kishore** β‚Ή50,000–5 lakh; **Tarun** β‚Ή5–10 lakh; **Tarun Plus** β‚Ή10–20 lakh (Oct 2024, for repeat good borrowers) | **β‚Ή36.18 lakh crore** disbursed across **55.45 crore** accounts by October 2025; over 10 crore first-time borrowers | | **Stand-Up India** | 2016 | Bank loans of **β‚Ή10 lakh to β‚Ή1 crore** to SC/ST and women entrepreneurs for greenfield enterprises | β€” | | **PM SVANidhi** | 2020 | Collateral-free working-capital loans to **street vendors**, with rewards for digital payments and repayment | β€” | | **Microfinance** | β€” | NBFC-MFIs, SFBs and banks lend to low-income households (95% women borrowers) | Loans fell 14% in FY25; RBI cut qualifying-asset norm to 60% | - **Outcome:** adults with a bank account rose from **35% (2011) to about 89% (2024)** (World Bank Global Findex 2025); the RBI's FI-Index stood at **67.0 in March 2025** (Access 35%, Usage 45%, Quality 20% β€” see Article 6). Share of Shishu loans in MUDRA accounts fell from 92% to 63% over ten years as borrowers graduated to larger loans. ## Why this matters for UPSC - Expect the exact differences: RTGS (real-time, β‚Ή2 lakh minimum) vs NEFT (batch); UPI (payment system, bank-money) vs CBDC (RBI liability); ONDC (interoperability); TReDS (invoice discounting). And current-affairs counts: **eight** countries live on UPI; **82 lakh** retail CBDC users. ## Further Reading - NCERT Economics textbooks (Class 11–12), the Economic Survey, the Union Budget documents and RBI publications cited in this note β€” the primary sources behind every figure above. ## Test Yourself: Practice Questions & PYQs Ten practice questions on payment systems, UPI abroad, CBDC and inclusion schemes, followed by real UPSC questions on payments and digital finance. ## Practice Questions **Q1.** Consider the following statements in respect of RTGS and NEFT: 1. In RTGS, settlement of each transaction is real-time, while NEFT settles payments in batches. 2. RTGS has a minimum transaction amount of β‚Ή2 lakh, whereas NEFT has no minimum. 3. Both systems are available round the clock. Which of the statements given above are correct? - (a) 1 and 2 only - (b) 2 and 3 only - (c) 1 and 3 only - (d) 1, 2 and 3 **Answer: (d)** β€” All three are correct: RTGS is gross, real-time (minimum β‚Ή2 lakh), NEFT is deferred net settlement with no minimum, and both run 24Γ—7 (NEFT since December 2019, RTGS since December 2020). **Q2.** Which one of the following best describes the Digital Rupee (eβ‚Ή)? - (a) A mobile wallet run by commercial banks - (b) A new payment app launched by NPCI - (c) A private cryptocurrency regulated by the RBI - (d) A digital form of legal tender that is a direct liability of the RBI **Answer: (d)** β€” It is sovereign money in digital form β€” a direct claim on the RBI β€” unlike UPI balances, which are bank deposits. **Q3.** Which of the following statements about UPI and the Digital Rupee is NOT correct? - (a) UPI payments are recorded in bank statements - (b) A digital rupee wallet-to-wallet transfer needs no bank settlement for the end user - (c) UPI is a real-time payment system - (d) In both cases the liability lies with the users and their respective banks **Answer: (d)** β€” A digital rupee is a liability of the RBI, not of commercial banks; UPI moves commercial-bank money. **Q4.** As per the Ministry of Finance's 2025 review, which of the following countries has UPI acceptance at merchant locations (live)? - (a) Germany - (b) Japan - (c) Qatar - (d) Bangladesh **Answer: (c)** β€” Qatar became the eighth live country in 2025, joining Bhutan, France, Mauritius, Nepal, Singapore, Sri Lanka and the UAE. **Q5.** The Open Network for Digital Commerce (ONDC) aims to - (a) mandate UPI payments for all online purchases - (b) provide government control over digital commerce transactions - (c) replace private e-commerce platforms with a government platform - (d) enable interoperability so that buyers and sellers on different networks can transact, reducing platform dominance **Answer: (d)** β€” ONDC is an open protocol network β€” the objective is to democratise digital commerce, not to replace private players. **Q6.** TReDS (Trade Receivables Discounting System) platforms such as M1xchange allow MSMEs to - (a) obtain collateral-based term loans - (b) list shares on stock exchanges - (c) obtain credit ratings - (d) get invoices and bills of exchange discounted by financiers **Answer: (d)** β€” TReDS is an RBI-authorised electronic platform for discounting MSME receivables from corporate buyers. **Q7.** Under the PM Mudra Yojana, loans in the 'Kishore' category range from - (a) β‚Ή5 lakh to β‚Ή10 lakh - (b) β‚Ή10 lakh to β‚Ή20 lakh - (c) up to β‚Ή50,000 - (d) β‚Ή50,000 to β‚Ή5 lakh **Answer: (d)** β€” Shishu: up to β‚Ή50,000; Kishore: β‚Ή50,000–₹5 lakh; Tarun: β‚Ή5–10 lakh; Tarun Plus (October 2024): β‚Ή10–20 lakh. **Q8.** Which of the following is a feature of the Account Aggregator framework? 1. It allows users to share financial data with regulated entities with their consent. 2. It is run by NBFC-AAs regulated by the RBI. 3. Account aggregators can use customers' data without consent for credit scoring. - (a) 2 and 3 only - (b) 1 only - (c) 1, 2 and 3 - (d) 1 and 2 only **Answer: (d)** β€” Consent is the core principle β€” statement 3 is wrong. **Q9.** Statement-I: Over 90 per cent of UPI users in a 2025 survey cited by the Economic Survey still use cash regularly. Statement-II: Digital payments in India complement cash rather than abruptly replacing it. Which one of the following is correct in respect of the above statements? - (a) Statement-I is correct but Statement-II is not correct - (b) Statement-I is not correct but Statement-II is correct - (c) Both Statement-I and Statement-II are correct and Statement-II explains Statement-I - (d) Both Statement-I and Statement-II are correct but Statement-II does not explain Statement-I **Answer: (c)** β€” The Survey describes a hybrid payments ecosystem in which UPI is general-purpose but cash coexists. **Q10.** Which of the following is a direct liability of the Reserve Bank of India? - (a) A retail Digital Rupee held in a wallet - (b) A fixed deposit with a commercial bank - (c) A prepaid wallet balance - (d) Balances in a UPI-linked savings account **Answer: (a)** β€” Only banknotes and the digital rupee (and banks' balances with the RBI) are RBI liabilities. ### UPSC Previous Year Questions (PYQs) *Real UPSC Prelims questions, checked against the official paper and answer key.* **Q1.** (2018) Which one of the following best describes the term "Merchant Discount Rate" sometimes seen in news? - (a) The incentive given by a bank to a merchant for accepting payments through debit cards pertaining to that bank. - (b) The incentive given by the Government to merchants for promoting digital payments by their custom- ers through Point of Sale (PoS) machines and debit cards. - (c) The charge to a merchant by a bank for accepting payments from his customers through the bank's debit cards. - (d) The amount paid back by banks to their customers when they use debit cards for financial transac- tions for purchaing goods or services. **Answer: (c)** β€” The Merchant Discount Rate is the fee a merchant pays its bank on each card transaction (a percentage of the sale) β€” not an incentive to the merchant or the customer. **Q2.** (2018) Which one of the following links all the ATMs in India - (a) Indian Banks' Association - (b) National Securities Depository Limited - (c) National Payments Corporation of India - (d) Reserve Bank of India **Answer: (c)** β€” NPCI operates the National Financial Switch that links all ATMs in India; the RBI regulates but does not run the switch. **Q3.** (2023) With reference to Central Bank Digital Currencies, consider the following statements : 1. It is possible to make payments in a digital currency without using US dollar or SWIFT system. 2. A digital currency can be distributed with a condition programmed into it such as a time-fame for spending it. Which of the statements given above is/are correct? - (a) Both 1 and 2 - (b) 2 Only - (c) Neither 1 nor 2 - (d) 1 Only **Answer: (a)** β€” A CBDC can settle directly between parties without the dollar or SWIFT (1 βœ”), and a digital currency can be programmable β€” e.g., usable only within a time frame (2 βœ”). **Q4.** (2024) Consider the following statements in respect of the digital rupee : 1. It is a sovereign currency issued by the Reserve Bank of India (RBI) in alignment with its monetary policy. 2. It appears as a liability on the RBI's balance sheet. 3. It is insured against inflation by its very design. 4. It is freely convertible against commercial bank money and cash. Which of the statements given above are correct ? - (a) 2 and 4 only - (b) 1 and 2 only - (c) 1 and 3 only - (d) 1, 2 and 4 only **Answer: (d)** β€” The digital rupee is a sovereign currency and an RBI liability, and it is freely convertible against bank money and cash (1, 2, 4 βœ”). Digital currency is NOT inflation-proof β€” it loses purchasing power like any currency (3 βœ—). **Q5.** (2025) Consider the following statements in respect of RTGS and NEFT: I. In RTGS, the settlement time is instantaneous while in case of NEFT, it takes some time to settle payments. II. In RTGS, the customer is charged for inward transactions while that is not the case for NEFT. III. Operating hours for RTGS are restricted on certain days while this is not true for NEFT. Which of the statements given above is/are correct? - (a) I and III - (b) I only - (c) I and II - (d) III only **Answer: (b)** β€” RTGS settles each payment in real time while NEFT settles in batches (I βœ”). Inward credit is free in both, and both now run 24Γ—7, so II and III are wrong. **Q6.** (2025) Consider the following countries: I. United Arab Emirates II. France III. Germany IV. Singapore V. Bangladesh How many countries amongst the above are there other than India where international merchant payments are accepted under UPI? - (a) All the five - (b) Only four - (c) Only two - (d) Only three **Answer: (d)** β€” UPI merchant payments were live in the UAE, France and Singapore (three), but not in Germany or Bangladesh. **Q7.** (2026) Which one of the following best describes the key objective of India's 'Open Network for Digital Commerce' (ONDC) initiative? - (a) To replace private e-commerce players - (b) To mandate UPI-based payments for all online transactions - (c) To break the dominance of large e-commerce platforms by enabling interoperability across networks - (d) To allow government control over all digital commerce transactions **Answer: (c)** β€” ONDC is an open, interoperable network meant to reduce the dominance of a few large e-commerce platforms. **Q8.** (2026) Which one of the following statements about Unified Payments Interface (UPI) and Central Bank Digital Currency (Digital Rupee) is not correct? - (a) In case of UPI, settlement for end users happens instantly as the money gets immediately debited or credited but in case of Digital Rupee, there is no settlement as the wallet balance gets transferred to another wallet. - (b) In both the cases (UPI and Digital Rupee), the liability lies with the users and their respective banks. - (c) UPI is a real-time payment system but Digital Rupee is akin to sovereign paper currency. - (d) UPI transactions are recorded by banks and reflected in bank statements but in case of Digital Rupee, no data is captured in bank statements as transactions are from one wallet to another. **Answer: (b)** β€” A digital rupee is a direct liability of the RBI, whereas UPI moves money held in commercial banks β€” so 'liability lies with users and their banks' in both cases is wrong. **Q9.** (2026) Which of the following statements about M1xchange's role in Micro, Small & Medium Enterprises (MSMEs) financing is/are correct? 1. M1xchange provides collateral based loans to MSMEs. 2. M1xchange facilitates discounting of invoices and Bills of Exchange for MSMEs. 3. M1xchange functions as a credit rating agency for MSMEs. Select the answer using the code given below. - (a) 1 only - (b) 2 and 3 only - (c) 1, 2 and 3 - (d) 2 only **Answer: (d)** β€” M1xchange is a TReDS platform: MSME invoices and bills of exchange are discounted on it β€” it is not a collateral lender or a credit-rating body. **Q10.** (2018) With reference to digital payments, consider the following statements: 1. BHIM app allows the user to tranfer money to anyone with a UPI-enabled bank account. 2. While a chip-pin debit card has four factors authentication, BHIM app has only two factors of authenti- cation. Which of the statements given above is/are correct? - (a) 2 only - (b) 1 only - (c) Both 1 and 2 - (d) Neither 1 nor 2 **Answer: (b)** β€” The BHIM app lets a user send money to anyone who has a UPI-enabled bank account (statement 1 is right). Statement 2 is wrong: a chip-and-PIN debit card does not use four-factor authentication β€” both it and BHIM rest on two factors, something you have and something you know. ### Mains Practice Questions Use these to frame full-length answers. You don't have to answer one exactly β€” they show the angles UPSC tests, so let them guide which points you cover. - Compare RTGS, NEFT, IMPS and UPI. Which is best suited to which kind of payment? - What is Digital Public Infrastructure? Discuss UPI, Account Aggregator and ONDC as examples and their economic effects. - Distinguish between the Digital Rupee, UPI and private cryptocurrencies. What are the benefits and risks of CBDC? - Assess how PMJDY, MUDRA and SVANidhi have changed financial inclusion in India. What gaps remain? ### UPSC Mains β€” Previous Years’ Questions on this topic (last 10 years) These are the **actual GS Mains questions** UPSC has asked on this theme β€” real proof of how, and when, it is tested. Try to write a full answer to each. - 2026 (GS-III): What do you mean by Digital Rupee? In this context, explain the working and progress of India's Central Bank Digital Currency (CBDC). - 2026 (GS-III): Examine the view that financial inclusion is an integral part of social and economic inclusion in a country like India. Also throw light on the usefulness of the R.B.I.'s Financial Inclusion Index. - 2023 (GS-III): What is the status of digitalization in the Indian economy? Examine the problems faced in this regard and suggest improvements. - 2016 (GS-III): Pradhan Mantri Jan-Dhan Yojana (PMJDY) is necessary for bringing unbanked to the institutional finance fold. Do you agree with this for financial inclusion of the poorer section of the Indian society? Give arguments to justify your opinion.