Customers of mid-sized universal banks, including RBL Bank, India Post Payments Bank (IPPB), Punjab & Sind Bank, Bandhan Bank and Central Bank of India, have seen higher Unified Payments Interface (UPI) transaction failure rates in the past year, according to National Payments Corporation of India (NPCI) data.
According to the data, on the remitter banks’ side, Baroda UP Gramin Bank had the highest technical default (TD) rate at 16% on an average between May 2023 and April 2024, followed by RBL Bank, Andhra Pragathi Grameena Bank and IPPB at 5.3%, 4.9% and 4.47%, respectively.
On the beneficiary banks’ side, Baroda UP Gramin Bank again topped the list with 12% TD rate. Punjab and Sindh Bank, Bandhan Bank, RBL Bank and IPPB featured in the top 10 list with TD rates in the range of 2.4%-3.1%.
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UPI transaction failure occurs because of two reasons – technical decline (TD) and business decline (BD). While BD occurs on account of customer error such as entering an invalid pin and incorrect beneficiary account, or due to other business reasons such as exceeding per transaction limit. TD occurs due to network issues on part of the bank or NPCI’s side.
On June 7, the Reserve Bank of India (RBI) governor Shaktikanta Das, in a post-monetary policy committee press meet, said whenever any outage in UPI services happens, the problem does not arise from NPCI or UPI’s end, but from the bank’s end. He also mentioned that the banking regulator is working with banks on this issue.
A senior executive at a private bank said as thousands of UPI transactions happen at the same time and they must go through multiple loops within nano seconds, some banks facing technological challenges may see higher TD rates.
In simple terms, any UPI transaction at a merchant’s location has to go through a number of steps instantaneously. These include connecting the merchant’s bank through the NPCI server with the customer’s bank within seconds. So, even if there is a split-second delay or latency in response from any of the players – banks or NPCI server – the transaction would fail.
Accordingly, lenders must ensure that their servers have the capacity to handle thousand of transactions at the same time, and the NPCI has to make sure that its servers are able to recognise and switch transactions correctly.
Banks, on their part, are working on this issue. Pushpendra Sharma, head of digital banking at RBL Bank, said the bank’s payments platform has witnessed a sharp growth in UPI transactions in recent times. “UPI is one of the major contributors in the digital payments space, and gauging the potential, we have significantly invested in building the payments platform organically. We moved to our new in-house switch in March and have witnessed a substantial fall in technical declines to 0.72 % in April 24.”
A Union Bank of India spokesperson said 99% of the bank’s UPI transactions are successful, and that the lender is “continuously improving” this metric by taking multiple initiatives.
“Our bank has recently migrated to new UPI switch to handle more than 80 million transactions per day along with the latest NPCI guidelines. To ensure high availability of UPI database, 2-node RAC (real application cluster) database configuration has also been done. This ensures the redundancy of the database,” the spokesperson said.
India recorded 14.03 billion UPI transactions amounting to over Rs 20.44 trillion in May 2024.
