Depositors will soon be able to use UPI, a real-time payment system for inter-bank transactions through mobile phones, to deposit cash in banks.

The Reserve Bank of India (RBI) has decided to allow Prepaid Payment Instruments (PPIs) through third-party Unified Payments Interface (UPI) applications.

Depositors can thus use UPI to deposit cash at cash deposit machines (CDMs) installed at ATMs and bank branches.

Announcing this fiscal’s first bi-monthly monetary policy, RBI Governor Shaktikanta Das today said that CDMs deployed by banks enhance customer convenience while reducing cash-handling load on bank branches.

The facility of cash deposit is presently available only through use of debit cards.

"Given the popularity and acceptance of UPI, as also the benefits seen from the availability of UPI for card-less cash withdrawal at ATMs, it is now proposed to facilitate cash deposit facility through use of UPI," Das said.

Operational instructions will be issued shortly, the RBI said.

The RBI has also decided to allow linking of PPIs through third-party UPI applications to provide more flexibility to users.

At present, UPI payments from bank accounts can be made by linking a bank account through the UPI app of the bank or using any third-party UPI application. However, the same facility is not available for PPIs.

PPIs can currently be used to make UPI transactions only by using the application provided by the PPI issuer.

"To provide more flexibility to PPI holders, it is now proposed to permit linking of PPIs through third-party UPI applications. This will enable the PPI holders to make UPI payments like bank account holders," the RBI said.

Instructions in this regard too will be issued soon.