Restrictions on the UPI Transactions because of Gaming Apps.

What is UPI?  

UPI stands for Unified Payments Interface and is a product of NPCI (National Payments Corporation of India). In simple words, UPI is an advanced version of IMPS and UPI ID/VPA can be considered as a unique email ID for the payments that are used by the banks to conduct the transaction using IMPS[1]

How does UPI works?

Performing a UPI Transaction:


It refers to sending money using a virtual address.

  • User logs in to UPI application
  • After successful login, the user selects the option of Send Money/Payment
  • The user enters beneficiary’s/Payee virtual id, amount and selects account to be debited
  • The user gets a confirmation screen to review the payment details and clicks on Confirm
  • The user now enters UPI PIN
  • The user gets successful or failure message


It means requesting money.

  • User logs in to his bank’s UPI application
  • After successful login, the user selects the option of collect money (request for payment)
  • The user enters remitters/payers virtual id, amount, and account to be credited
  • The user gets a confirmation screen to review the payment details and clicks on confirm
  • The payer will get the notification on his mobile to request money
  • Payer now clicks on the notification and opens his banks UPI app where he reviews payment request
  • Payer then decides to click on Accept or decline
  • In case of accept payment, the payer will enter UPI PINto authorize the transaction
  • Transaction complete, payer gets successful or declines transaction notification
  • Payee/requester gets notification and SMS from the bank for credit of his bank account[2]

What does this mean?

According to NPCI statistics, since the pilot of the UPI system in 2016, the number of banks live on UPI has grown from 21 to 216 as of March 2021. Transaction volume has increased from Rs 273 crore to a little above approximately Rs 5 lakh crore.

The National Payments Corporation of India (NPCI) can shortly prohibit UPI transactions in gaming apps worth less than Rs 50. The decision is based on a recent increase in low-ticket purchases that has caused the UPI network and banking system to become overburdened. The reform is intended to ‘moderate’ UPI rates, which have been risen sharply since the outbreak of the COVID-19 pandemic, resulting in an uptick in bank outages and spiked technical issues.

Why ban only gaming transactions?

All over the world gaming exceeded music and film in terms of value and has arisen as a scalable medium of entertainment. According to industry experts and their reports, in recent weeks, NPCI has seen a significant uptick in lo-ticket repeat purchases as low as Rs 1 performed by gaming apps. The number of purchases on UPI  has increased dramatically. Transactions by UPI increased to Rs 5.04 lakh crore in March, up from Rs 4.25 lakh crore in February. The NPCI  saw a 95% rise in UPI transactions in FY 2020-21. Last year, it increased from Rs 21 lakh crore to Rs 41 lakh. The Covid-19 crisis provided a boost to UPI-based digital transactions. A  surge in volume due to gaming apps may have contributed to the system’s stress, but any restrictions would most likely be closely considered by NPCI before being announced.

“Teen Patti” or known as Indian Poker is one of the most commonly played online game, the Covid pandemic, and the social distancing rules have brought in the “Teen Patti” real money game where instant online payments mostly UPI has been used, have added another reason to worry for NPCI.

The surge in UPI transactions during IPL season

During the IPL season, transaction volume has increased, especially on fantasy sports applications like Dream11, Mobile Premier League (MPL) allows users to create their teams. As cricket is one of the top sports on these platforms, and this is despite very low ticket transactions.[3] This ensures that gaming users make transactions ranging from Rs 1 to Rs 10 on the UPI network, causing UPI transactions to be delayed. Banks get clogged and are unable to process other transactions due to spurt in processing loads.  According to a KPMG report, the fantasy sports industry user base grew at a rate of 165.9% during 2016-2020, from 2 million in June 2016 to 100 million in 2020.

NPCI stated that these ‘low-ticket transactions that were possibly used to push the volumes across the gaming apps are been used as a “misuse” of UPI, these purchases put the UPI scheme at risk.

Effect on Real money games

In the previous financial year, the market for online fantasy sports (OFS) was projected to be worth Rs 2300 crore to Rs2700 crore, while the market for non-fantasy, real money games like rummy and poker was worth between Rs 2500 crore to Rs 3000 crore. The number of OFS players is equivalent to 100 million, including 30-40 million real-money players.

For real-money games, which are focused on micro-transactions, this step may be problematic. Rather than charges a monthly fee, gamers pay online while they play. As a result, the majority of transactions are under Rs 100. UPI will be seen less often in the future, according to gaming industry analysts. As banks have no reason to incur additional loads on their backend networks without the merchant discount rate (MDR), which is the fee that banks impose on merchants to process digital payments. To allow more merchants to accept digital payments, the government revoked MDR in 2019.

The gaming industry, on the other hand, has already begun to look at the various options for appealing against the ban. They approached NPCI through the Federation of Indian Chambers Of Commerce and Industry (FICCI) and the internet and Mobile Association Of India for this process.  Since the real money gaming industry relies on small player purchases, the ban could have a negative impact as the ban could potentially harm a part of their revenue generation. While the Public Gaming Act of 1867 exists, states are still permitted to create their regulations. While most states tend to fall back on the Public Gambling Act like Manipur, Uttarakhand, Haryana, Punjab, etc, some states have gone ahead and outrightly banned online gaming that involves money. Among these states are Tamil Nadu, Andhra Pradesh, and most recently Kerala.

How will this affect you?

If this ban happens, then a large number of your payments will fail and sometimes you might get an error while doing any payments using the UPI network.

If you want to play any online games, you’ll need to transact more than Rs 50 on UPI networks. And you won’t be able to transact as low as Rs 1 which you were earlier able to do through the UPI platform. Till now whenever there is any failed transaction or pending transaction, it takes up to 3 days to reach the final status and if the status is failed, then you are refunded the amount. The respective amount will be refunded is refunded to the various payment sources. If you carry out a transaction with a combination of several payment instruments then a reversal is initiated and the corresponding amount is refunded. All the money transfers are handled exclusively by UPI. Wallets like PhonePe do not allow you to transfer your PhonePe wallet to another’s wallet. The wallet money can only be used for charging, invoice payments, and transactions with merchants on PhonePe. After waiting a while, your transaction will go into a floating state (yellow screen), a successful state (green screen), or a failed state (red screen). While the transaction is pending, note that it can take up to 5 minutes for the payment status to be updated.[4]

This creates a lag and burden on the UPI interface. However, you may have to use other payment methods like net banking, credit and debit cards.

Some industry experts agree that this change would improve the efficiency and reliability of UPI transactions across the world. If the NPCI implements this modification, bank outages can be greatly reduced. [5]


According to a gaming industry expert, “there is a broader dialogue between banks and NPCI to curtail all repeated low-value transactions because there is no revenue to be made on processing UPI anymore”. Over half of the customers choose UPI as a payment method. The majority of the purchase –over 50% is under Rs 50. This is a major setback for the banking industry as well. Instead of UPI, NPCI wants customers and merchants to use standing instructions (SI) based mode of payment, such as net banking. The credentials of the customers and merchants and the ticket size are to be known beforehand. SI-based recurring channels are being engineered to process such payments. The average ticket size for pay-to-play participation is normally as low as Rs 35, implying that either the player has to pay with SI or fantasy sports and other pay-to-play sites to increase the ticket price. Many major gaming industry firms are appealing against the ban claiming the ban to be a major blow to their whole business model.

Taxation Revenues will also be affected – The original plan was said to have been to ban all gaming transactions under Rs 250, but the gaming industry representatives have managed to negotiate the ceiling down. Still, more than 50% of all transactions of a certain gaming merchant are under Rs 50. The Income Tax and Finance Acts sets a flat 30% tax on all income from online or offline casinos and gambling.[6] There are surcharges of 10 or 15 percent for large earning exceeding Rs 50 or Rs 1 crore respectively. The Health and Education cess of 4% is payable by all persons liable to income tax. Thus, the final tax rate for casino and gambling below Rs 50 lakhs is 31.2 %. The non-taxable minimum of Rs 10,000 means that revenue from income tax would be hardly affected by the low-ticket UPI transaction ban.

Opinions and Suggestions

Banks are stressed over the network that suffocates when multiple VPSs are created. This is a big problem for small transactions as little as Rs 1. It’s unclear whether NPCI (National Payments Corporation of India) wants to curb fantasy game gambling or just trying to protect its UPI interface from crashing. NPCI is taking steps towards banning transactions for a particular set of merchants is technically possible and an easy way to maintain the stability of the UPI network. Although it might have some negative results for the online players as they are now limited within circumscribed boundaries for doing gaming transactions that were not there earlier. Many online games that involve micro-transactions may have shifted their payment methodologies or have to shut such operations.



This article is authored by Kashish Tiwari, Student at Ajeenkya DY Patil University.

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