UPSC Prelims 2017 Q43: Indian Economy – Digital Payments & Financial Inclusion
Which of the following is a most likely consequence of implementing the ‘Unified Payments
Interface (UPI)’?
- (a) Mobile wallets will not be necessary for online payments.
- (b) Digital currency will totally replace the physical currency in about two decades.
- (c) FDI inflows will drastically increase.
- (d) Direct transfer of subsidies to poor people will become very effective.
Answer: (a) Mobile wallets will not be necessary for online payments.
Explanation
Unified Payments Interface (UPI)
Launched by NPCI in April 2016.
It moves money directly between bank accounts in real time, using a Virtual Payment Address.
| Feature | UPI | Mobile wallet |
|---|---|---|
| Money held in | Your bank account | The wallet (must be loaded first) |
| Transfer | Bank to bank, instant | Wallet to wallet |
| Interest on balance | Yes (it stays in the bank) | No |
The options checked:
| Option | Likely consequence? |
|---|---|
| (a) Mobile wallets will not be necessary for online payments | Yes |
| (b) Digital currency will totally replace physical currency in about two decades | No; far too extreme |
| (c) FDI inflows will drastically increase | No; unrelated to a payments system |
| (d) Direct transfer of subsidies will become very effective | No; that depends on Aadhaar and bank accounts |
Answer: (a) Mobile wallets will not be necessary for online payments.
Why each option is right or wrong
- (a) CORRECT. UPI pays directly from the bank account, so mobile wallets are not necessary.
- (b) Incorrect. UPI will not totally replace physical currency; 'totally' is too extreme.
- (c) Incorrect. FDI inflows depend on investment policy, not on a retail payments interface.
- (d) Incorrect. Direct transfer of subsidies runs on Aadhaar-linked bank accounts, not UPI.
Key point
UPI (NPCI, 2016): instant bank-to-bank transfers using a Virtual Payment Address; no need to load a mobile wallet.
Remember
UPI = bank to bank, no wallet needed.
Common mistakes
- Choosing the subsidies option; Direct Benefit Transfer uses the Aadhaar Payment Bridge.
- Treating UPI as a wallet; it is an interface between bank accounts.
- Falling for extreme words like 'totally' and 'drastically'.
Exam tip
Extreme words such as 'totally' and 'drastically' usually mark a wrong option.
Sources
- National Payments Corporation of India — Unified Payments Interface (UPI): Procedural Guidelines
- Reserve Bank of India — Payment and Settlement Systems in India