UPSC Prelims Practice Questions — UPI and the cost of policy reversal

Q1. Under the Payment and Settlement Systems Act, 2007, which one of the following is the 'designated authority' for the regulation and supervision of payment systems in India?

  • A. The National Payments Corporation of India, the umbrella entity for retail payment systems
  • B. The Board for Regulation and Supervision of Payment and Settlement Systems
  • C. The Reserve Bank of India, the central bank constituted under the Act of 1934
  • D. The Department of Financial Services under the Ministry of Finance

Q2. Which one of the following correctly describes the institutional arrangement through which the Unified Payments Interface is operationalised?

  • A. It is operated by the Indian Banks' Association, which independently regulates every bank participating on the platform
  • B. It is operated by the National Payments Corporation of India, functioning under the regulatory oversight of the Reserve Bank of India
  • C. It is operated exclusively by the Reserve Bank of India, which owns and runs the entire central switching infrastructure
  • D. It is operated by the Ministry of Electronics and Information Technology, the sole authority over all retail payment systems

Q3. As per the Government's ten-year review of the Unified Payments Interface, which one of the following correctly states UPI's standing in real-time payments as of 2025?

  • A. The world's largest real-time payments platform, accounting for about 49% of global real-time payment volume
  • B. The world's second largest real-time payments system, accounting for about 25% of global real-time payment volume
  • C. Asia's largest real-time payments system, though placed below Brazil's Pix in global real-time payment volume
  • D. The world's largest card-based retail payment network, accounting for about 60% of global card payment volume

Q4. The Taxation and Other Laws (Amendment) Bill, 2026, as introduced in the Lok Sabha, amends how many existing Acts?

  • A. Two Acts — the Income-tax Act, 2025 and the Finance Act, 2026
  • B. Three Acts — the Income-tax Act, 2025, the Finance Act, 2026 and the Payment and Settlement Systems Act, 2007
  • C. Four Acts — the above three together with the Reserve Bank of India Act, 1934, which governs the central bank
  • D. Five Acts, covering every statute that governs electronic payment systems in India

Q5. In India's digital payments framework, the Merchant Discount Rate is best described as which one of the following?

  • A. A concession extended by sellers to buyers who settle bills through electronic modes instead of cash
  • B. A charge borne by the seller as a proportion of transaction value, apportioned among the entities facilitating the payment
  • C. A levy recovered from the buyer over and above the billed amount by the bank that acquires the transaction
  • D. An interchange amount remitted by the issuing bank to the network for authorising and routing the transaction

Q6. With reference to the ceilings on Merchant Discount Rate for debit card transactions rationalised by the Reserve Bank of India and made effective from 1 January 2018, consider the following: 1. For merchants with annual turnover up to ₹20 lakh, the rate for physical PoS and online transactions is capped at 0.40% of transaction value. 2. For merchants with annual turnover up to ₹20 lakh, QR-code based transactions attract a lower cap of 0.30% of transaction value. 3. For merchants with annual turnover above ₹20 lakh, the rate for physical PoS and online transactions is capped at 0.90%, subject to a ceiling of ₹1,000 per transaction. 4. For merchants with annual turnover up to ₹20 lakh, the per-transaction ceiling on the amount charged is ₹1,000. Which of the above is/are correctly identified?

  1. For merchants with annual turnover up to ₹20 lakh, the rate for physical PoS and online transactions is capped at 0.40% of transaction value.
  2. For merchants with annual turnover up to ₹20 lakh, QR-code based transactions attract a lower cap of 0.30% of transaction value.
  3. For merchants with annual turnover above ₹20 lakh, the rate for physical PoS and online transactions is capped at 0.90%, subject to a ceiling of ₹1,000 per transaction.
  4. For merchants with annual turnover up to ₹20 lakh, the per-transaction ceiling on the amount charged is ₹1,000.
  • A. 1 and 3 only
  • B. 2 and 4 only
  • C. 1, 2 and 3 only
  • D. 1, 2, 3 and 4

Q7. Once the amendment to Section 10A comes into force, the decision on whether and in what form to levy a Merchant Discount Rate on UPI rests with the UPI and Services Steering Committee. This committee is headed by which one of the following?

  • A. The Board for Regulation and Supervision of Payment and Settlement Systems
  • B. The Department of Payment and Settlement Systems of the Reserve Bank of India
  • C. The National Payments Corporation of India
  • D. The Department of Financial Services in the Ministry of Finance

Q8. With reference to the Government's incentive scheme for promotion of low-value BHIM-UPI (P2M) transactions, consider the following statements: 1. The scheme covers only UPI person-to-merchant transactions of value up to ₹2,000 pertaining to the small merchant category. 2. The incentive is provided at the rate of 0.15% of transaction value. 3. The incentive is released by the Government to the acquiring bank, which then shares it with the issuer bank, the payment service provider bank and the app providers. 4. The scheme reimburses the entire merchant discount revenue foregone on all categories of UPI transactions, irrespective of merchant size or transaction value. Which of the above is/are NOT correct?

  1. The scheme covers only UPI person-to-merchant transactions of value up to ₹2,000 pertaining to the small merchant category.
  2. The incentive is provided at the rate of 0.15% of transaction value.
  3. The incentive is released by the Government to the acquiring bank, which then shares it with the issuer bank, the payment service provider bank and the app providers.
  4. The scheme reimburses the entire merchant discount revenue foregone on all categories of UPI transactions, irrespective of merchant size or transaction value.
  • A. 1 and 3
  • B. 2 and 4
  • C. 1, 2 and 4
  • D. 4 only