NPCI's volume cap circular: Will limits on UPI transaction volumes impact India's fintech sector?

UPI transactions, NPCI, reserve bank of india, bank of india, UPI Transactions Impact, CCI, tpap, national payments corporation of india, upi

The National Payments Corporation of India (NPCI) released the “Guidelines on volume cap for Third Party App Providers (TPAP)” (Circular). As per the Circular, effective January 1, 2021, TPAPs are required to ensure that the total volume of transactions initiated through their respective Unified Payment Interface (UPI) applications do not exceed 30% of the total volume of transactions in the country during the preceding three months.

Further, existing TPAPs that cross the 30% cap have been given two years to comply with this new directive. On March 25, 2021, NPCI also released the Standard Operating Procedure (SOP), which provides the guidelines for TPAPs to fulfil the norms for staying within the stipulated volume cap.

Notably, NPCI’s justification for the volume cap is to

  • Encourage new players to increase their market share, thereby evening out the distribution of market share among all participants and preventing monopoly
  • Address risks and protect the UPI ecosystem. However, the Circular and SOP fail to elucidate these ‘risks’, raising several questions on both legal and business issues.

Regulatory Concerns

From a regulatory point of view, the Circular could be a violation of the Competition Act, 2002 (Competition Act). As per Section 4 of the Competition Act:

No enterprise or group shall abuse its dominant position.

There shall be an abuse of dominant position under sub-section (1), if an enterprise or group:

  • Limits or restrictions: Production of goods or provision of services or market.

By limiting the volume of transactions handled by individual TPAPs to 30%, NPCI has imposed a restriction on the provision of services, which amounts to an abuse of dominant position under the Competition Act. Notably, the Circular would not impact the payment app BHIM (Bharat Interface for Money), as its market share is negligible compared to other leading TPAPs. In fact, the Circular could potentially result in the volume of transactions increasing on the BHIM platform.

In this context, the essential facilities doctrine would also be relevant. The Competition Commission of India (


) has indirectly embraced this doctrine in several cases. In simple terms, the essential facilities doctrine is a concept where, if a dominant undertaking controls certain facilities and refuses, without justification, to make such facilities available to its competitors, or does so in a discriminatory manner, such an act is an abuse of dominant position.

Being the sole umbrella organization for retail payments in India, NPCI is in a dominant position. Given the current regulatory framework, UPI would be considered to be an essential facility which cannot be recreated by NPCI’s competitors.

Furthermore, CCI has held that, in the absence of a reasonable regulatory rationale or necessity, certain cases will unquestionably be impacted by an anti-competitive effect. While NPCI has sought to justify the volume, cap being introduced due to perceived risks, the nagging question is whether these risks are real.

Business Concerns

From a business perspective, the anti-competitive environment created by the volume cap would have negative consequences on the entire UPI ecosystem by impacting quality, growth, and innovation. Upon reaching 30% volume, TPAPs will have no reason to compete with each other. Inadequate competition will result in complacency, which, in turn, may also lead to a decline in the quality of customer service.

The Circular may also disincentivize TPAPs from investing in the UPI ecosystem. While NPCI is currently the sole umbrella entity for retail payments, the Reserve Bank of India is in the process of authorizing new umbrella entities (NUEs) for retail payments. These NUEs would be allowed to set up, manage, and operate new payment systems in the retail space, and develop new payment methods. Consequently, upon reaching 30% volume, TPAPs will have no option but to engage with other entities to sustain their growth in the retail payments space.

Perhaps NPCI should take heed of the impending possibility that it may lose its premier position as a systemically important payment system once other umbrella entities enter the digital payments market. A more prudent approach would be for NPCI to collaborate with TPAPs in finding practical solutions to the ‘perceived risks’.

And finally, the implementation of the volume cap is a serious concern. The SOP issued by NPCI attempts to control a TPAP’s market share by moderating the number of new customers it on-boards without affecting existing customers. It is yet to be ascertained what obligation will be imposed on TPAPs whose market shares, based on the transactions of existing customers, exceed the volume cap, without on-boarding new customers.

The need of the hour is a consultative solution-based approach to address the many uncertainties in respect of NPCI’s new thrust for digital payment apps. The question remains, who will bell the cat?

(Probir Roy Chowdhury, Partner and Kavya Katherine Thayil, Senior Associate at J Sagar Associates)

Internet Explorer Channel Network
News Related


Two issues are holding up the Naga solution under the ongoing Indo-Naga political talk: NSCN-IM

NSCN-IM stated Naga national flag and Constitution (Yehzabo), the two issues that is holding up the Naga solution under the ongoing Indo-Naga political talk in Delhi. NSCN-IM leadership is engaged ... Read more »

The elderly complain to the hotline about age discrimination in banks

For example, seniors can suddenly no longer take out subscriptions that require a credit card with credit. Expensive repairs to houses for which a loan has to be taken out ... Read more »

Navjot Singh Sidhu to continue as Punjab Congress chief, says issues 'sorted out'

Congress leader Navjot Singh Sidhu has assured former party president Rahul Gandhi of withdrawing his resignation as the chief of party’s Punjab unit, senior All India Congress Committee (AICC) functionary Harish ... Read more »

Cooling company Smeva in Valkenswaard receives Royal designation after 100th anniversary

VALKENSWAARD – The cooling company Smeva group from Valkenswaard has been awarded the Royal designation. The province of Noord-Brabant reports this on Friday evening. A counter at the butcher or ... Read more »

Transition to carbon neutrality opens up great opportunities for Russia — PM

"This is a chance to use breakthrough technologies in the backbone sectors of the economy, to form new growth points, high-tech jobs, and additional competitive advantages in the context of the global energy transition," Mikhail Mishustin noted Read more »

11 killed after tractor-trolley overturns in UP's Jhansi

At least 11 people, including four children, were killed here on Friday after a tractor-trolley in which they were travelling overturned when the driver suddenly applied the brakes to avoid ... Read more »

Many vacancies, why can't young men in particular find a job?

Finding work in a tight labor market should be easy. Yet it is mainly young men who are sitting on the couch at home on benefits, the Central Planning Bureau ... Read more »

‘Because of the uncertainty, the step to work feels like a punishment'

After eight years of absence from the labor market, Dagmar Niewold (41) from Amersfoort established himself at the beginning of this year as an independent consultant. Specialized in the relationship ... Read more »

‘The road to a new future was not easy'

Anita: „Having my own Bed & Breakfast was a dream that had been in my head for a long time. But then, Jack and I had only been married four ... Read more »

ECB considers favoring green bonds

The European Central Bank is looking for opportunities to do more in the fight against climate change. That says Frank Elderson, member of the Executive Board of the ECB in ... Read more »

Gitlab stock market debut makes Dutchman billionaire

From one day to the next, he became one of the richest Dutchmen this week: 42-year-old Sid Sijbrandij. This native from Twente is still unknown in the Netherlands, but he ... Read more »

Tips On Protecting Your Money and Privacy When Betting Online

The coming of gambling events on the online portals has eased its accessibility and multiplied its thrill. Nobody has to go through the hassles of physical casinos like waiting periods ... Read more »

Agreement on new collective labor agreement for civil servants: higher wages and working from home allowance

Civil servants will receive a wage increase of 2 percent. This increase will take effect retroactively on 1 July 2021. In addition, they will receive a home working allowance for ... Read more »

When you really need to sit together

“Work from home if you can and in the office if you need to.” That is still the rule in many companies. But when is working in the office really ... Read more »

Tala raises $145 million in funding round led by Upstart

Representative image Fintech company Tala on Friday said it has raised USD 145 million in Series-E funding round, led by Upstart with participation from the Stellar Development Foundation. New investors Kindred Ventures and The J. Safra Group, along with ... Read more »

Aluminium plants grappling with critically low level of coal stock: AAI

Representative image Aluminium plants in the country are grappling with critically low level of coal stocks and if the fuel supply is not restored immediately it would lead to irrevocable ... Read more »

Congress questions govt silence on veracity of 'Galwan video', says PM Modi must ensure China is held accountable

Prime Minister Narendra Modi (Illustration: Moneycontrol) Paying tributes to 20 bravehearts who lost their lives in Galwan valley, the Congress on Tuesday asked when will status quo ante be restored ... Read more »

The growing pains of Gorillas, the flash delivery guy who got out of the ground in record time

A ladle on an aluminum grater, a set of pan lids, whistles, bicycle bells, a broomstick used to hammer on a traffic sign. On Wednesday afternoon, about two hundred protesters ... Read more »

Speeding car rams into Durga idol immersion procession in Chhattisgarh; 1 dead, over 15 injured

Visuals shared on social media A speeding car rammed into devotees part of a Durga idol immersion procession in Chhattisgarh on October 15, leading to the death of at least one person. ... Read more »

MS Dhoni becomes first in world cricket to captain in 300 T20 games

File image of MS Dhoni during an IPL match. Instagram/, BCCI) Chennai Super Kings skipper Mahendra Singh Dhoni on Friday became the first player in world cricket to captain a ... Read more »

India is strategic partner and very close friend': Israeli official says ahead of EAM's visit

India has emerged as Dubai’s second biggest trading partner after China with the overall volume touching 38.5 billion dirham in the first half of 2021, according to official data released. ... Read more »

'Unscientific methodology', says Centre on Global Hunger Index that places India at 101st spot

Representative image The methodology used to prepare the Global Hunger Index (GHI) 2021 is “unscientific”, the Centre said on October 15, a day after the report was released which ranks ... Read more »

What is PM Gati Shakti Yojana?

When the GoI had announced a massive budget of Rs 100 trillion to develop infrastructure, a few people had wondered how money could solve red-tapism. PM Gati Shakti National Master Plan, launched ... Read more »

Drugs case: Aryan Khan speaks to parents via video call from jail; gets Rs 4,500 via money-order

File image of Aryan Khan (Image: Instagram/___aryan___) Aryan Khan, son of Bollywood actor Shah Rukh Khan, who is lodged in Arthur Road prison in central Mumbai in a case of ... Read more »

'Upstart caterer' Sir Gerry Robinson was one of the outstanding bosses of his age

From humble beginnings in Donegal, Sir Gerry rose to enjoy a colourful career at the helm of Granada where he managed to stir up the wrath of showbusiness before taking centre stage in his own takeover dramas. Read more »

Govt removes export curbs on all diagnostic kits, reagents

With COVID-19 cases coming down in the country, the government on Friday removed export curbs on all diagnostic kits and reagents including instruments, which are used in detection of coronavirus ... Read more »

Former Boeing pilot charged over 737 Max issue which contributed to fatal crashes

Mark Forkner, 49, faces up to 100 years in prison if he is convicted of two counts of fraud and four counts of wire fraud. Read more »

Forex reserves rise by $2.039 billion to $639.516 billion

Representative image The country’s foreign exchange reserves rose by USD 2.039 billion to USD 639.516 billion in the week ended October 8, according to RBI data. In the previous week ... Read more »

Will provide financial support to 7 new defence companies if required: Rajnath Singh

Seven new defence public sector undertakings, carved out of the erstwhile Ordnance Factory Board (OFB), were on Friday dedicated to the nation by Prime Minister Narendra Modi as part of ... Read more »

Indian crypto space is huge, but how transparent is it?

Though cryptocurrency has vast potential for growth, investor safety remains a concern (Image: Reuters) India seems to be miles ahead of the world when it comes to upping its ante ... Read more »

Titan, Kalyan Jewellers' shares reflect the optimism of Q2 updates

Titan Co. Ltd and Kalyan Jewellers India Ltd’s stocks have put up a good show on the bourses in the past one month, rising by around 25 percent and 18 ... Read more »

British Gas owner says energy bosses should face 'fit and proper' test as consumers face £2bn crisis bill

Chris O'Shea, chief executive of Centrica, tells Sky's Ian King Live that rules need to be put in place to ensure the crisis, which has seen the collapse of a series of its smaller rivals, never happens again. Read more »

Amit Shah attacks Savarkar's critics, says they should have some shame

Amit Shah ”Veer” Savarkar’s patriotism and valour cannot be questioned, Union Home Minister Amit Shah asserted on Friday, as he hit back at those doubting the freedom fighter’s commitment to India and its freedom struggle, and ... Read more »

Ian King Business Podcast: Energy crisis, bereavement leave, and Ikea investment

Listen to “Energy crisis, bereavement leave and Ikea investment”. There are calls for more energy companies to be regulated like banks, to prevent another crash. :: Listen and subscribe to ... Read more »

Reliance Brands partners with Manish Malhotra, to acquire 40% stake in his luxury brand

President & CEO of RBL Darshan Mehta and fashion designer Manish Malhotra. Indian retail giant, Reliance Brands Limited (RBL) on October 15 announced it will acquire a 40 percent stake ... Read more »

Hilco-owned Homebase faces scrutiny over COVID support after profits surge

Homebase is not thought to have repaid the nearly £40m of taxpayer support it received despite seeing one measure of profits soar 15-fold last year, Sky News can reveal. Read more »

No rush in officially recognising Taliban's rule: Vladimir Putin

Mullah Baradar Akhund, a senior official of the Taliban, seated with a group of men, makes a video statement, in this still image taken from a video recorded in an ... Read more »

India notifies 8,424 tonnes of raw sugar exports to US under TRQ

The government on Friday permitted export of 8,424 tonnes of raw or white sugar under tariff-rate quota (TRQ) to the US, which enables shipments to enjoy relatively low tariff. TRQ ... Read more »

How to get your vehicle scrapped — a step-by-step guide

The Delhi Transport Department recently issued new rules regarding the usage of vehicles that are 15 years old. According to the new guidelines, once a petrol or CNG car crosses ... Read more »