Curbing UPI fraud! A ‘YES/NO’ alert will now appear on the screen before suspicious payments; banks have devised a major plan..

Digital transactions worth billions of rupees are taking place daily in the country via the Unified Payments Interface (UPI). However, incidents of online scams, cyber fraud, and fake refund or customer care scams have also risen sharply. To curb this digital payment fraud, Indian banks have proposed a new security model to the National Payments Corporation of India (NPCI) and the Reserve Bank of India (RBI). Under this model, a 'YES/NO' confirmation prompt (pop-up alert) will appear on the user's screen before processing suspicious or high-risk UPI transfers. Let us understand in detail what this new 'YES/NO' alert system from banks is, how it will work, and the extent to which it will protect the average UPI user.

**New Plan to Curb Fraud**
Major Indian banks are formulating significant plans to prevent fraud in online payments. Several banks are suggesting a software modification for payment apps. Under this proposal, for peer-to-peer (P2P) transactions, the sender's approval would be sought before the funds are credited to the recipient's account. If the customer selects 'YES', the payment will be processed within seconds. If they select 'NO', the transaction will be cancelled. If no action is taken, the funds will be transferred but will only be credited to the recipient's account after a one-hour delay.

This is one of the suggestions submitted to the Reserve Bank of India (RBI). The RBI had sought feedback from banks on a discussion paper outlining measures to prevent fraud involving fake calls, coercion, and deepfakes—including the concept of 'lagged credit' (crediting funds after a delay) instead of instant credit.

Many banks are presenting this suggestion as an alternative to the uniform one-hour delay (in crediting the recipient's account) proposed in the discussion paper. Banks fear that a one-hour delay in processing payments could slow down the adoption of digital payments and lead to an increase in cash transactions.

**Other suggestions have also emerged**
Furthermore, banks are not in favor of displaying a "yes-no-nothing" prompt for every transaction exceeding the ₹10,000 limit mentioned in the discussion paper. Instead, they propose that this prompt appear only for payment commands exhibiting unusual behavior—such as a transaction initiated at 2 AM, a payment to a recipient with whom the customer has never transacted before, or a transfer to a recently opened bank account (accounts often used by "money mules"). Some banks have also suggested raising this limit from ₹10,000 to ₹20,000 or ₹25,000 after an initial period.

A senior banker quoted in an ET report stated that the RBI is taking the issue of rising fraud cases seriously and intends to issue guidelines—or at least draft rules—soon. This matter was also raised during a recent meeting between Deputy Governor Jain and bank CEOs. Banks have submitted their suggestions and are exploring various solutions. While most fraud occurs via "authorized push payments," there is a consensus that excessive friction could slow down online payments.

In "authorized push payment" fraud, victims are deceived into initiating and authorizing the transaction themselves. Another source cited in the ET report noted that while transactions exceeding ₹10,000 may account for only about 2 percent of the total volume, the absolute number is significant, given that UPI processes 23.66 billion transactions monthly.

Rising Fraud Incidents
According to banking sources, the National Payments Corporation of India (NPCI)—which operates all retail digital money transfer and payment systems in India—has expressed concerns regarding the proposed 'lagged credit' (delayed credit) mechanism and potential disruptions to the payment process. A banker quoted in an ET report noted that given the surge in online payments and users' familiarity with a seamless digital payment experience, the NPCI believes India should not simply replicate systems used in other countries.

Furthermore, 'deferred credit' would not help curb misuse involving investment fraud schemes or 'mule accounts,' as the account holders—both the payer and the payee—are often complicit in these financial crimes. The proposed precautionary measures are limited to P2P (peer-to-peer) transactions and do not apply to payments made to merchants (P2M).

An industry insider mentioned in the ET report that many small and micro-merchants do not open current accounts with banks, preferring instead to accept payments via QR codes linked to their savings accounts. Consequently, these merchant transactions are effectively P2P in nature. A subset of these transactions—albeit a small one—could be impacted. The number of reported digital fraud cases rose from 2.6 lakh in 2021 to 28 lakh in 2025. During the same period, the total value of these frauds surged from ₹551 crore to ₹22,931 crore.

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