Unified Payments Interface (UPI) — the backbone of India's digital payments ecosystem — has been witnessing a spike in downtime incidents in recent months, raising concerns among users, merchants, and financial institutions alike. Once hailed for its near-instant transactions and rock-solid reliability, UPI's growing instances of service disruption have put a spotlight on the challenges of scaling such a massive payment network.

So, what’s really going wrong?

A Victim of Its Own Success

UPI’s phenomenal growth has been nothing short of extraordinary. In March 2025 alone, UPI processed over 18 billion transactions, marking a 24% jump from the previous quarter. With almost every retailer — from multinational chains to local kirana shops — accepting UPI, the load on the system has reached unprecedented levels.

Experts point out that while the National Payments Corporation of India (NPCI) has consistently upgraded the infrastructure, the pace of user adoption and transaction volume growth has far outstripped those improvements.

"UPI was built for high volumes, but the growth in the last two years, especially post-2023 with the rise of ONDC and real-time settlements for SMEs, has added extraordinary stress on the system," said a senior official familiar with NPCI operations.

Bank-Level Bottlenecks

While UPI is a unified platform, its performance heavily depends on the individual banks participating in the network. Every transaction request must be processed by both the sender’s and receiver’s banks.

Several banks — especially smaller ones and regional rural banks — have lagged in upgrading their UPI infrastructure. This leads to bottlenecks, where transactions are either delayed or fail altogether. According to recent data, nearly 25% of UPI downtimes were traced back to banking partner failures, not NPCI’s core network itself.

Large players like Paytm Payments Bank, PhonePe, and Google Pay often face the brunt of customer frustration, even though the root cause often lies deeper in the banking backend.

Scheduled Upgrades and Peak Hour Load

Another major reason behind the downtimes is scheduled infrastructure upgrades that sometimes go awry. Banks and payment apps routinely perform backend upgrades late at night or during off-peak hours. However, if something goes wrong during an upgrade, or if there is unexpected traffic (such as during a major sale event or festival), downtimes become more visible.

Festivals like Holi, Diwali, and New Year’s Eve have seen a spike in failed or delayed UPI transactions, leading to customer dissatisfaction and social media outrage.

NPCI’s Response

NPCI has acknowledged the problem and has been working closely with banks to strengthen capacity. In a statement earlier this month, NPCI said it has mandated minimum uptime standards for member banks and is pushing for the adoption of more robust monitoring tools.

Additionally, NPCI is piloting a system where repeated bank-level failures could lead to penalties and throttling of transaction volumes for underperforming banks — an approach similar to what is seen in other financial networks worldwide.

The Reserve Bank of India (RBI) too has stepped in, asking banks to invest more heavily in payment infrastructure and ensuring that downtime incidents are reported transparently.

The Road Ahead

With plans underway to take UPI international — targeting countries like UAE, Singapore, and parts of Europe — ensuring reliability is no longer just a domestic necessity but a global priority.

Experts suggest a multi-pronged approach:

• Regular audits of bank-level UPI infrastructure

• Better load balancing during peak hours

• More redundancy built into the system

• Moving to newer technologies like edge computing for faster transaction handling

For now, users are advised to have backup payment methods during known peak times and be patient as India's beloved digital payment system evolves to meet the future's demands.