The National Payments Corporation of India (NPCI) is working on a new solution for the Unified Payments Interface (UPI) framework, which will enable digital payments to be made without active internet connections.

The Unified Payments Interface (UPI) is a technique that integrates several banking features, seamless fund routing and vendor payments into a single mobile application. It also manages "Peer to Peer" collection requests, which can be scheduled and paid according to one's requirement and convenience.

According to three government officials and one senior executive at a national bank that is presently testing the solution, the UPI Lite solution will most likely be used first to promote digital payments under Rs 200 in rural areas, reported the Mint.

The NPCI’s move comes after the Reserve Bank of India recently allowed limited offline UPI payments. On January 5, RBI allowed digital payments of up to Rs 200 to be made without an internet connection.

UPI Lite will enable feature phone users to access UPI networks and make digital payments straight from their bank accounts using their phones.

According to the bank official, there are two major solutions that are currently being tested. The first is a SIM Overlay, while the second is a software-provisioned solution that will utilise OTA updates, the Mint report mentioned.

SIM Overlay is a technology that expands the capabilities of a phone's SIM card, authorising payments and other services to be completed even when there is no data connection. OTA, on the other hand, will deliver the solution to the device's firmware directly.

The OTA solution, according to the bank official, would be identical to the snake game on old Nokia feature phones, which would receive updates over networks without 3G or 4G connections. It will, however, be different from how it is generally done and the technology used is patent-pending.

The government announced in December last year that it had approved an incentive scheme that would see Rs 1,300 crore in reimbursements to merchants as part of the Merchant Discount Rate, the charge that banks impose on merchants who accept electronic payments.

Acquiring banks will now be motivated to pay a part of RuPay card transactions and lower the value of BHIM-UPI digital payments.

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(Edited by : Thomas Abraham)