India Digital Payments: UPI, NEFT, RTGS, IMPS & AEPS
Unified Payments Interface (UPI)
Unified Payments Interface (UPI) is a digital payment system developed by the National Payments Corporation of India (NPCI) that allows users to transfer money instantly between bank accounts using a mobile phone. It is one of the most popular, fast, secure, and convenient digital payment methods in India. UPI works on the principle of linking a user’s bank account with a Virtual Payment Address (VPA), such as abc@bank, making transactions possible without sharing bank details like account number or IFSC code. UPI operates 24×7 and supports real-time transactions, meaning money is transferred within seconds. Users can send or receive money, pay bills, recharge phones, buy goods online, and even make offline payments through UPI. All functionalities are available within a single mobile app such as Google Pay, PhonePe, Paytm, BHIM UPI, and bank-specific UPI apps.
One of the biggest advantages of UPI is its simplicity. A person needs only a smartphone, an internet connection, and a mobile number linked to a bank account. After downloading a UPI app, the user creates a UPI PIN, which acts as a security code for all transactions. This PIN ensures that no unauthorized person can use the account. UPI apps also support additional security layers such as fingerprint lock, face unlock, and device authentication.
UPI supports different types of transactions:
- Person-to-person (P2P) transfers, such as sending money to friends or family.
- Person-to-merchant (P2M) payments, such as paying shopkeepers, bills, or online shopping.
- QR code payments, where users scan a merchant’s QR code to make quick payments.
- Request money feature, which allows users to send a payment request to someone else.
UPI has also introduced advanced features like UPI Lite for small offline payments, UPI AutoPay for recurring payments such as subscriptions and EMIs, and credit on UPI, allowing users to pay using their credit cards through the UPI interface. Security is a key strength of UPI: it uses multi-layer authentication, device binding, and encrypted communication to protect users from fraud. Even though only a virtual address is shared, the actual bank details remain hidden, ensuring privacy and safety.
Aadhaar Enabled Payment System (AEPS)
Aadhaar Enabled Payment System (AEPS) is a digital payment method introduced by the National Payments Corporation of India (NPCI). It allows people to perform basic banking transactions using their Aadhaar number and biometric authentication, such as fingerprint or iris scan. AEPS is mainly designed to help rural and semi-urban areas where people may not have smartphones, internet access, or traditional banking facilities. AEPS works through Banking Correspondents (BCs) or micro-ATM machines installed at shops, ration depots, or village centers. To use AEPS, the customer needs three things: an Aadhaar number, a bank account linked with Aadhaar, and biometric authentication. When the user visits a BC point, the operator enters the Aadhaar number into the micro-ATM device and the user verifies their identity through a fingerprint or iris scan. Once verification is successful, the transaction is completed.
AEPS supports several basic financial services, such as:
- Cash Withdrawal – Users can withdraw money from their Aadhaar-linked bank account.
- Cash Deposit – Users can deposit money into their account.
- Balance Enquiry – Users can check account balance easily.
- Fund Transfer – Money can be transferred between Aadhaar-linked accounts.
- Mini Statement – Users can get a record of recent transactions.
AEPS offers many advantages. It is very simple to use because it does not require ATM cards, PIN numbers, or smartphones. It is highly useful for people who are illiterate or not familiar with digital banking. It also promotes financial inclusion by providing banking services in remote villages through BC points. The system is secure because it uses biometric authentication, which is difficult to duplicate. However, AEPS also faces challenges such as fingerprint mismatch, connectivity issues in rural areas, and dependency on Aadhaar linking. Still, it remains one of the most successful systems to deliver banking services to every section of society.
National Electronic Funds Transfer (NEFT)
National Electronic Funds Transfer (NEFT) is an electronic payment system developed by the Reserve Bank of India (RBI) that enables individuals, companies, and organizations to transfer money securely from one bank account to another within India. NEFT is one of the most widely used digital banking services because it is safe, reliable, and available in almost all banks across the country. The main feature of NEFT is that it works on a batch settlement system, where transactions are processed in half-hour batches throughout the day.
NEFT operates 24 hours a day, seven days a week, including holidays. This makes it convenient for users to send money anytime without visiting the bank. To initiate an NEFT transfer, the sender needs the following details of the receiver: account number, account type, bank name, branch name, and IFSC code. These details help the system identify the correct bank branch and ensure accurate fund transfer.
NEFT is suitable for various types of payments such as personal transfers, bill payments, online shopping payments, salary distribution, vendor payments, and business transactions. It does not have any minimum or maximum transfer limit, allowing both small and large payments. Most banks provide NEFT free of charge for internet and mobile banking users, making it a cost-effective payment method.
One of the major advantages of NEFT is its high level of security. Since it is regulated by the RBI, the system follows strict security protocols and uses encrypted communication to protect banking information. It also provides confirmation messages through SMS or email, giving users confidence that the money has been transferred successfully.
However, NEFT is not an instant payment system like UPI or IMPS. Since transactions are processed in batches, the money may take some time to reflect in the receiver’s account, especially during peak hours. Despite this small delay, NEFT remains popular due to its accuracy, wide reach, and trustworthiness.
Real-Time Gross Settlement (RTGS)
RTGS, or Real-Time Gross Settlement, is a digital payment system introduced by the Reserve Bank of India (RBI) for transferring large-value funds from one bank account to another. As the name suggests, RTGS processes transactions in real time, meaning money is transferred immediately without any delay. Unlike NEFT, which works in batches, RTGS settles each transaction individually, making it one of the fastest and safest methods for high-value payments.
RTGS is mainly used for large transactions, and the minimum amount that can be transferred is ₹2 lakh, while there is no upper limit. Because of this, RTGS is commonly used by businesses, companies, and individuals who need to transfer high-value payments instantly. It works 24×7 on all days of the year, including Sundays and bank holidays, which makes it very convenient for urgent payments.
To use RTGS, the sender must provide details of the receiver such as bank account number, account type, branch name, and IFSC code. Once the payment is initiated through internet banking, mobile banking, or by visiting the bank branch, the amount is transferred immediately to the receiver’s bank. Since RTGS uses a direct one-to-one settlement system, it reduces the chance of delays or errors in payment.
RTGS has several advantages. The biggest benefit is the speed—money transfers happen instantly in real time. It is also very secure, as it is operated and monitored by the RBI. The system uses encrypted communication, making it safe for transferring large amounts. RTGS transactions are also irreversible once completed, which reduces fraud and ensures final settlement.
However, RTGS is not suitable for small payments because it is designed only for high-value transfers. It also requires accurate details; even a small mistake in the account number or IFSC code can cause failure. Additionally, the system may charge a small fee when initiated from bank branches, though online RTGS is usually free.
Immediate Payment Service (IMPS)
Immediate Payment Service (IMPS) is an instant electronic payment system provided by the National Payments Corporation of India (NPCI). It enables users to transfer money immediately between bank accounts at any time of the day. IMPS works 24×7 throughout the year, including Sundays and bank holidays, which makes it one of the most reliable and fast banking services for urgent money transfers.
IMPS was introduced to offer a quick alternative to NEFT and RTGS. Unlike NEFT, which works in batches, and RTGS, which is used only for high-value payments, IMPS allows instant transfers of small as well as large amounts. It is widely used by individuals for sending money to family, paying fees, urgent bill payments, and online purchases. Businesses also use IMPS for quick settlements when immediate confirmation is needed.
To use IMPS, the sender needs basic information such as the receiver’s mobile number, MMID (Mobile Money Identifier), or bank account number with IFSC code. Most banks allow IMPS through internet banking, mobile banking apps, ATMs, and sometimes even SMS banking. Once the user enters the required details and confirms the payment with a PIN or OTP, the money is transferred instantly, and both sender and receiver get notification messages.
IMPS has several advantages. The most important benefit is its speed—payments happen instantly with real-time confirmation. It has a high success rate and works round-the-clock, which is very useful during emergencies. IMPS is also secure, as it uses two-step authentication and encrypted communication to protect financial data. The service supports both person-to-person (P2P) and person-to-merchant (P2M) transactions, making it versatile for all kinds of payments.
However, IMPS usually has a transaction limit, which may vary depending on the bank. Also, some banks may charge a small fee for IMPS transfers, especially through ATMs or branches. Despite these minor limitations, IMPS remains one of the fastest and most widely used instant money transfer systems in India.