Key Facts for India
- Primary real-time rails: Unified Payments Interface (UPI), Immediate Payment Service (IMPS).
- Typical settlement times: Instant.
- Common limits: The per-transaction limit is ₹100,000; daily aggregate limits vary by institution.
What “real-time payments” means in India
In India, real-time payments are instant, 24/7 fund transfers between bank accounts, primarily executed through the Unified Payments Interface (UPI). This system allows payments using mobile numbers, QR codes, or virtual IDs, making digital transactions a part of daily life. India is the world's largest market, processing nearly 130 billion real-time transactions in 2023 and accounting for 84% of all electronic payments. While no single statute provides a legal definition, the framework is governed by the Reserve Bank of India through regulations like the Payment and Settlement Systems Act of 2007.
The system's primary regulator is the Reserve Bank of India (RBI). The National Payments Corporation of India (NPCI), an organization created by the RBI, developed and operates the country's main real-time rails, UPI and IMPS. The NPCI acts as the central clearing and settlement body for these transactions, with no major subsidiary clearing houses involved. For messaging, India’s real-time systems are built on the ISO 8583 standard, which facilitates communication between different financial institutions participating in the network.
Processing more daily transactions than global networks like Visa, India’s system accounts for nearly half of all real-time payments worldwide, setting a global benchmark for other nations.
Payment Rail Overview
Unified Payments Interface (UPI)
Introduced in 2016, the Unified Payments Interface is an instant payment protocol built as a layer on top of the IMPS infrastructure. Developed by the NPCI, it facilitates inter-bank transfers using mobile devices, allowing users to link multiple bank accounts into a single application. Transactions are initiated using a unique Virtual Payment Address (VPA), phone number, or by scanning a QR code, abstracting away complex bank details.
- Interoperability: Connects over 675 banks and numerous third-party payment apps on a single, open platform.
- Simplified Addressing: Uses a Virtual Payment Address (VPA) or phone number for transactions, enhancing privacy by not exposing account numbers.
- Advanced Features: Supports recurring payments through AutoPay, offline transactions via UPI Lite, and voice-based commands for feature phone users.
- QR Code Payments: Enables simple and fast person-to-merchant (P2M) payments, which has driven widespread adoption among vendors of all sizes.
Pros and Cons
- Pros: Extremely high scalability, user-friendly design, low-to-no cost for users, and rapid international expansion.
- Cons: The system can experience occasional outages, and the instant, irreversible nature of transactions makes users susceptible to certain types of digital fraud.
Immediate Payment Service (IMPS)
Launched in 2010, the Immediate Payment Service was India's pioneering 24/7 real-time payment system. It provides instant interbank electronic fund transfers through various channels, including mobile and internet banking. IMPS serves as the foundational settlement network that underpins the entire UPI ecosystem, processing the back-end transfers for UPI transactions.
- Always-On Transfers: Offers round-the-clock, real-time fund transfers, 365 days a year.
- Foundational Infrastructure: Acts as the core backbone for UPI, handling the real-time settlement between banks.
- Multi-Channel Access: Can be accessed directly through a bank's mobile app, internet banking portal, or even ATMs.
Pros and Cons
- Pros: Highly reliable and established infrastructure that serves as the bedrock for India's modern payment systems.
- Cons: The user interface is less intuitive than UPI's, often requiring more information like account numbers and IFSC codes for transfers.
Other Minor Rails
- National Electronic Funds Transfer (NEFT): A system for one-to-one fund transfers that operates in near real-time, processing transactions in half-hourly batches throughout the day.
- Real-Time Gross Settlement (RTGS): Designed for high-value transactions, RTGS settles fund transfers individually and in real time on a gross basis, without bundling them with other transactions.
- Aadhaar Enabled Payment System (AEPS): A payment service that allows basic banking transactions at micro-ATMs through a business correspondent using Aadhaar biometric authentication, primarily serving rural and remote areas.
Limits, Fees, and SLAs
- Limits: The standard UPI transaction limit is ₹100,000, but it is raised to ₹500,000 for specific payments like IPOs and hospital bills.
- R2P Fees: UPI transactions are typically free for users and merchants, a policy designed to encourage widespread adoption and small-value payments.
- Operating Hours: The system provides instant fund transfers 24/7, 365 days a year, with no specified cut-off times or scheduled downtime for processing.
- Failures & Returns: A real-time feature aims to unblock funds from failed transactions in 30 seconds, and online dispute resolution is also available.
Compliance and Risk
KYC/KYB & AML
Regulations mandate Know Your Customer (KYC) checks for all users, linking a verified mobile number to a bank account. For international visitors, a full KYC check based on a valid passport and visa is required to access certain wallet services.
Data Residency & Privacy
The Reserve Bank of India enforces a strict data localization policy. All payment system providers must store complete end-to-end transaction data exclusively on servers within India. This approach supports regulatory oversight while maintaining user privacy through virtual payment addresses.
Fraud Controls
The framework includes technical controls imposed by the NPCI, such as API rate limiting and two-factor authentication. To address rising scams, regulators also mandate online dispute resolution mechanisms and have backed public awareness campaigns to educate users on safe practices.
Recordkeeping & Audits
Payment system providers must store all transaction data locally and prove compliance through a mandatory System Audit Report (SAR). This audit, conducted by a CERT-IN empaneled firm and approved by the board, verifies adherence to the RBI's data storage directives.
Lightning Network Integration as a Solution
The Lightning Network is a payment protocol built on Bitcoin that processes transactions off the main blockchain. It uses a network of private channels to send funds instantly and at a very low cost. While domestic real-time payment systems excel within national borders, the Lightning Network can act as a global bridge, connecting these separate systems through a universal, open standard for money.
Both systems offer near-instant settlement, but their scope differs. Domestic rails like UPI are dominant nationally, often with no user fees. The Lightning Network offers similarly low costs, with fees of just fractions of a cent, but on a global scale. Its reach extends across borders by default, connecting a worldwide user base through platforms that have integrated the technology, offering a truly international alternative to nationally-focused payment infrastructures.
- Cross-Border Complexity: It bypasses the slow and expensive correspondent banking system, allowing for direct, near-instant international payments without costly intermediaries.
- Fragmented Systems: Instead of relying on one-off integrations between different countries' payment rails, LN provides a single, open network for global interoperability.
- Micropayment Viability: The network's minimal transaction fees make it practical to send very small amounts of money across borders, opening up new models for content monetization, streaming payments, and gaming.
Its architecture presents a compelling model for a borderless, open, and real-time financial network.
B2B Enterprise Use Cases
- Supplier Payments – A company pays its international suppliers instantly over the Lightning Network, bypassing traditional banking delays.
“Business value:” Immediate cross-border settlement strengthens supply chain relationships and reduces payment friction. - Merchant Settlement – A payment processor aggregates customer payments and settles funds to merchants in real-time using Lightning.
“Business value:” Merchants receive funds instantly, improving cash flow and eliminating chargeback fraud risk. - Treasury Optimization – A corporate treasury moves funds between international subsidiaries 24/7 over the Lightning Network to manage liquidity.
“Business value:” Real-time global liquidity management without banking hours or settlement windows. - Global Payroll – A company pays its remote workforce and freelancers instantly, with payments settled directly to their wallets.
“Business value:” Instant, low-cost global payroll processing attracts and retains top international talent. - Machine-to-Machine Payments – An IoT device makes automated micropayments for data access or API calls in real-time.
“Business value:” Creates new pay-per-use business models for machine-to-machine economies.
Cross-Border Transactions and Remittances to India
Sending real-time payments to India is complex due to stringent compliance, ambiguous crypto regulations, and a strict tax regime. The core challenge lies in bridging disparate payment rails—integrating global systems with India's domestic UPI. This requires navigating inefficient FX paths, which often involve multiple currency conversions instead of direct settlement. The goal is to create a single, fluid path for money to move across borders, but regulatory and technical hurdles make this a significant undertaking for international payment providers.
- Singapore: An integration between India's UPI and Singapore's PayNow system enables real-time cross-border payments and remittances. This allows Indian travelers to pay directly at thousands of retailers in Singapore using their UPI apps.
- United Arab Emirates (UAE): UPI is accepted at numerous retail locations and payment terminals across the UAE, allowing Indian residents and tourists to make QR code-based payments. The financial corridor is also being developed for inbound remittance services.
- United States: Remittances from the U.S. to India are facilitated through an integration between Xoom (a PayPal service) and UPI. This allows the Indian diaspora to send money directly to 66 Indian banks in near real-time.
The Lightning Network provides a global settlement layer that bypasses traditional intermediaries. By using Bitcoin as a bridge asset, it connects domestic payment systems, allowing for instant, low-cost cross-border transactions without the delays and high fees of correspondent banking.
How Lightspark Makes Integration Easy
Lightspark helps fintechs, digital banks, wallets, and exchanges connect to the Lightning Network for global, real-time payments. We abstract away the operational complexities, managing node infrastructure, inbound liquidity, and dynamic routing so you can focus on your core product. Our platform provides comprehensive developer tooling and manages the compliance requirements for cross-border transactions. With Lightspark, your business can achieve sub-second settlement globally, connecting your services to an open monetary network. To get started with building on the world's universal payment rail, Talk to our team.
Sources and Further Reading
- https://www.aciworldwide.com/real-time/india – India's real-time payments market overview.
- https://business.cornell.edu/hub/2024/12/20/indias-unified-payments-interface-has-revolutionized-its-digital-payments-market/ – UPI's impact on digital payments.
- https://en.wikipedia.org/wiki/Unified_Payments_Interface – Comprehensive overview of UPI system.
- https://www.lightspark.com/contact – Contact the Lightspark sales team.
- https://www.lightspark.com/knowledge/is-crypto-legal-in-india – Legality of cryptocurrency in India.
- https://www.lightspark.com/news/insights/what-are-lightning-payments – Explaining low-cost Lightning Network payments.
- https://www.paymentsjournal.com/how-indias-upi-rose-to-dominate-real-time-payments/ – UPI's dominance in real-time payments.
- https://www.pib.gov.in/PressNoteDetails.aspx?NoteId=154912&ModuleId=3 – India's digital payment ecosystem growth.
- https://www.reuters.com/world/india/indias-central-bank-proposes-boost-international-usage-rupee-2025-10-01/ – Proposals for internationalizing the rupee.
