The government has initiated a comprehensive drive to address rising Unified Payments Interface (UPI) transaction failures, with banks being asked to collaborate with the National Payments Corporation of India (NPCI) to improve system reliability. According to reports from The Economic Times, discussions held over the past two months are part of a broader government push to strengthen the digital payments ecosystem. NPCI is expected to review lenders' performance and suggest measures to improve success rates, as reported by people familiar with the matter.
Transaction declines have been particularly high at smaller lenders, including regional rural banks, where weaker technology infrastructure and customer awareness gaps have amplified failures. Among the top 50 UPI members, Airtel Payments Bank recorded the highest business decline failure in February at 21.97%, while Baroda UP Bank saw the highest technical decline at 7.26%, according to the latest available data. As reported by The Economic Times, a transaction may fail due to technical issues such as system outages or network disruptions at banks or NPCI, or due to business reasons including incorrect personal identification number (PIN) entry or transaction limits being breached.
The issue has been compounded by periodic outages, with NPCI reporting downtime across 11 banks in February, where Bank of India logged the highest at about 14 hours. According to The Economic Times, a senior executive at a state-run bank noted that "We will assess whether these failures are largely technical or if there is a need for greater customer awareness." The executive emphasized that "Transaction declines don't bode well for any stakeholder in the ecosystem."
The push to improve reliability comes as UPI cements its dominance in India's payments landscape, with Finance Minister Nirmala Sitharaman recently telling Parliament that UPI accounted for 81% of all retail digital payments in FY25, making it the world's largest real-time retail payments system. As reported by The Economic Times, the Reserve Bank of India has backed the roll-out of infrastructure through the Payments Infrastructure Development Fund, enabling the deployment of about 580 million digital touchpoints and nearly 5.7 billion QR codes.
Policymakers are looking beyond basic transactions, with a finance ministry report highlighting that the next phase of growth for UPI and RuPay would hinge on value-added services such as micro-credit, insurance and loyalty programmes, which could drive deeper user engagement and financial inclusion. According to The Economic Times, these developments aim to deepen adoption, especially in rural and semi-urban areas, while strengthening the overall digital payments ecosystem and user trust in the system.
