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India’s real-time payment system, Unified Payments Interface (UPI) suffered a major outage on May 12, affecting digital payments across the country. The outage affected apps like Google Pay, PhonePe, and Paytm during peak business hours.
The reason behind the outage is yet to come to light. PhonePe, a phone wallet app accounting for nearly half of UPI transactions in India at 47.25 percent, had rerouted all of its traffic through a new datacenter. However, heavy traffic on May 12 evening exposed a “network capacity shortfall due to which transactions started failing,” according to PhonePe CTO and founder Rahul Chari’s X post.
While the worst has passed, social media posts suggest that the payment problems aren’t over yet. Several merchants, including PhonePe users, are complaining about transactions either not going through or failing at the start.
The UPI system processes nearly 18 billion transactions in March 2025 alone, totalling ₹24.77 lakh crore or $297.3 billion according to The Financial Express. With the government continuing the push for UPI adoption, the underlying infrastructure is starting to fail. India’s Finance Minister Nirmala Sitharaman wants to hit one billion daily transactions on the UPI system by 2027. With frequent outages in its current state, UPI’s underlying technical infrastructure doesn’t seem up to the task.
The National Payments Corporation of India (NPCI), an umbrella body that operates and regulates retail payments and settlement systems in India, including UPI, released new rules in April 2025 to tackle future outages. These rules only restrict how often banks can check transaction status.
The government body also wants to introduce API rate limits and has made annual audits by CERT-In auditors mandatory. None of the new changes directly aim to build more infrastructure to support the increasing traffic, and limiting transaction status requests or API calls is far from a permanent or reliable solution.
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