Social Science Jou nal o Ad anced
Resea ch
2025 Volume 5 Numbe 5 Sep embe
E-ISSN:2583-0074
Resea ch A icle
Uni ied Paymen s In e ace
Publishe
www.singhpublica ion.com
F om UPI o FREE-AI: India’s Policy T ansi ion owa ds In elligen
Financial Go e nance
Madan CAJS
1*
, Kuma M
2
DOI:10.5281/zenodo.17284450
1* C.A. Jyo i Sap a Madan, Assis an P o esso , TMU, Mo adabad, U a P adesh, India.
2 Mohi Kuma , Assis an P o esso , TMU, Mo adabad, U a P adesh, India.
This pape examines he ansi ion o India's inancial sec o om in as uc u e-cen ic digi al public
in as uc u e o AI-d i en go e nance amewo ks. This epo looks a how he Uni ied Paymen s
In e ace ecosys em, which made 19.47 billion ansac ions wo h ₹25.08 lakh c o e in July 2025,
se s he s age o he RBI's F amewo k o Responsible and E hical Enablemen o A i icial
In elligence o be pu in o ac ion. The mixed-me hods esea ch combines an in e up ed ime-se ies
design ocused on he Augus 2025 FREE-AI decla a ion wi h an analysis o policy documen s ela ed
o digi al paymen s, da a p o ec ion, and c edi in as uc u e. The main sou ces o da a a e NPCI
ansac ion da a, Accoun Agg ega o adop ion me ics ha show 100 million consen s by Augus
2024, and PTPFC pilo implemen a ion da a ha has been a ailable since Augus 2023. The
me hodology c ea es an In elligen Financial Go e nance Quali y index ha measu es how much
p og ess has been made in he a eas o ai ness, consume p o ec ion, and supe iso y e ec i eness
in each sec o . Ea ly esea ch shows ha UPI's high ansac ion olume and he Accoun Agg ega o
amewo k's 1059% g ow h in FY 2023-24 p o ide enough scale o FREE-AI's go e nance sys ems.
The epo says ha India's p og essi e policy de elopmen in a eas like paymen sys ems, da a
p o ec ion, and AI go e nance c ea es measu able bases o sma inancial con ol while s ill
espec ing people's p i acy and ollowing he ules.
Keywo ds: uni ied paymen s in e ace, amewo k o esponsible and e hical enablemen o
a i icial in elligence, in elligen inancial go e nance quali y (IFGQ), digi al paymen s, AI go e nance
ma u i y, da a p o ec ion compliance, DPI-enabled c edi in eg a ion
Co esponding Au ho How o Ci e his A icle To B owse
C.A. Jyo i Sap a Madan, Assis an P o esso , TMU,
Mo adabad, U a P adesh, India.
Email:
Madan CAJS, Kuma M, F om UPI o FREE-AI: India’s
Policy T ansi ion owa ds In elligen Financial
Go e nance. Soc Sci J Ad Res. 2025;5(5):36-44.
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© 2025 by Madan CAJS, Kuma M and Published by Singh Publica ion. This is an Open Access a icle licensed unde a C ea i e Commons
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Soc Sci J Ad Res 2025
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1. In oduc ion
India's inancial policy amewo k has changed a lo .
I has gone om making basic ansac ion sys ems
o making sys ems ha make go e nance sma e .
The Uni ied Paymen s In e ace (UPI) is a he
cen e o his change, and i has g own a an
amazing a e. I s capaci y o handle immense
ansac ion olumes has no only e olu ionized
quo idian paymen s bu also es ablished a
ounda ion o supe iso y and egula o y inno a ion
(Rese e Bank o India, 2025).
Recen da a backs up his scale. In July 2025, UPI
handled 19.47 billion ansac ions ha we e wo h
₹25.08 lakh c o e. This shows a 35% ise in
ansac ion olume and a 22% ise in alue
compa ed o July 2024 (NPCI, 2025). This kind o
g ow h shows ha India's digi al in as uc u e is
s ong and eady o mo e ad anced policy changes.
This in as uc u e doesn' wo k on i s own. The
Accoun Agg ega o amewo k adds ano he laye
ha le s people sha e da a sa ely and wi h hei
pe mission. Sahama i's esea ch shows ha by
Augus 2024, he amewo k had ecei ed mo e
han 100 million consen s. The 1,059 pe cen
inc ease in consen eques s is e en mo e
su p ising. They wen om 5.5 million in FY 2022–
23 o 63.75 million in FY 2023–24. These numbe s
show how he sys em is encou aging eliable,
consen -based da a lows ha a e impo an o
using AI in an e hical way (B.G. Mahesh, CEO o
Sahama i, 2024).
The Public Tech Pla o m o F ic ionless C edi
(PTPFC), which he Rese e Bank Inno a ion Hub
launched in Augus 2023, is ano he s ep o wa d.
The pla o m was i s used o nine ypes o loans,
such as Kisan C edi Ca ds and MSME loans. This
shows ha ins i u ions can digi ize and s anda dize
c edi wo k lows. I also shows how hese kinds o
ule-based sys ems can mee he needs o AI
applica ions ha a e s ill in hei ea ly s ages (RBI,
2023).
In ligh o his ope a ional con ex , he RBI's FREE-
AI commi ee, led by D . Pushpak Bha acha yya o
IIT Bombay, submi ed i s amewo k on Augus 13,
2025. I sugges ed se en basic "Su as" and 26
ecommenda ions ac oss six s a egic pilla s o help
inancial se ices adop AI (Reu e s, Augus 13,
2025).
The F amewo k o Responsible and E hical
Enablemen o A i icial In elligence in India's
inancial sec o (KPMG India, Augus 25, 2025)
s esses us , ai ness, accoun abili y, and
sus ainabili y while inding a balance be ween
inno a ion and isk educ ion. The IndiaAI Mission
has been gi en ₹10,372 c o e o e i e yea s. The
Union Budge 2024-25 has se aside o e ₹550
c o es jus o he mission. This money will help
build na ional compu ing in as uc u e ha will
suppo sec o al AI p ojec s, such as inancial
go e nance applica ions (IndiaAI.go .in, July 23,
2024). A he same ime, he Digi al Pe sonal Da a
P o ec ion Ac 2023, which was passed by
Pa liamen on Augus 7 (Lok Sabha) and Augus 9
(Rajya Sabha) and became law on Augus 11, 2023,
se s up consen mechanisms and iducia y du ies
ha a e in line wi h FREE-AI's equi emen s o
p o ec ion and accoun abili y (PRS India, 2025).
This sequence o e en s—UPI's eco d 707 million
daily ansac ions on Augus 2, 2025, he DPDP
Ac 's implemen a ion o da a p o ec ion codi ica ion,
and FREE-AI's comp ehensi e ecommenda ions o
a go e nance amewo k—se s up India's inancial
sec o o a g adual in eg a ion o AI while s ill
p o ec ing consume s and keeping he sys em
s able (India Today, Augus 4, 2025; RBI FREE-AI
Commi ee, Augus 2025). The ansi ion om he
scale o digi al public in as uc u e, as e idenced by
Maha ash a's 9.8% sha e o na ional UPI olume
and Ka na aka's 5.5% con ibu ion, o in elligen
go e nance amewo ks illus a es a dis inc i e
policy ajec o y ha emphasizes ounda ional
capaci y p io o sophis ica ed o e sigh
mechanisms (NPCI S a is ical Da a, July 2025).
2. Li e a u e Re iew
2.1 Digi al Public In as uc u e and
Ecosys ems o FinTech
India S ack’s a chi ec u e, comp ising Aadhaa o
digi al iden i y, UPI o paymen s, and he Accoun
Agg ega o amewo k o consen -d i en da a
sha ing, is widely ecognized as a ans o ma i e
example o digi al public in as uc u e. Schola s
a gue ha his model demons a es how public
sys ems can in eg a e e ec i ely wi h p i a e-sec o
inno a ion o c ea e a cohesi e digi al ecosys em
(Na ayanan and Bane jee, 2024).
Madan JS, e al. F om UPI o FREE-AI
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Empi ical e idence u he ein o ces his
pe spec i e. Each successi e laye o India S ack
has ac ed as a ca alys , accele a ing he expansion
o he in ech landscape. No ably, ansac ion
olumes and consen lows ha e egis e ed s eep,
some imes exponen ial, g ow h immedia ely
ollowing he in oduc ion o new in as uc u e
componen s (Sha ma e al., 2023).
2.2 UPI Adop ion and Financial Inclusion
The apid expansion o he Uni ied Paymen s
In e ace (UPI) illus a es he close ela ionship
be ween digi al paymen in as uc u e and inancial
inclusion in India. E idence epo ed by Mee anshi
(2025) shows ha UPI p ocessed an a e age o 613
million ansac ions pe day in June 2025. This
miles one was accompanied by a 14 pe cen ise in
me chan accep ance, wi h he s onges
imp o emen s obse ed in semi-u ban and u al
dis ic s. Such pa e ns sugges ha UPI is playing a
signi ican ole in ex ending digi al inance o
segmen s o he popula ion his o ically unde se ed
by o mal paymen sys ems.
Compa ing egions gi es us mo e in o ma ion abou
his connec ion. Maha ash a, which makes up
almos 9.8% o he coun y's UPI ansac ion
olume, and Ka na aka, which makes up 5.5%, a e
bo h s a es whe e mo e people a e using digi al
paymen s and less cash is in ci cula ion. In hese
a eas, especially small businesses, a e using UPI
mo e o en o e e yday ansac ions (SBI Resea ch,
2025). The e idence sugges s ha UPI se es no
only as a paymen sys em bu also as a ca alys o
mo e ex ensi e s uc u al changes in inancial
beha io , g adually diminishing eliance on cash
while expanding he accessibili y o o mal inancial
se ices.
2.3 Accoun Agg ega o F amewo k and Da a
Po abili y
The Accoun Agg ega o (AA) sys em is a big s ep
owa d making consen -based da a sha ing a eali y
in India's inancial sec o . The amewo k helps
lowe in o ma ion asymme ies ha ha e his o ically
limi ed lending p ac ices by le ing people choose
how hei inancial in o ma ion is sha ed. Sahama i
epo s ha he numbe o AA consen s expanded
d ama ically, ising om 5.5 million in FY 2022–23
o 63.75 million in FY 2023–24. This inc ease made
i possible o gi e ou loans wo h ₹74,500 c o e in
he i s hal o FY25 (Mahesh, 2024).
Schola ly e alua ions unde sco e he p agma ic
ad an ages o his in as uc u e. Acco ding o
esea ch, adop ing AA cu he ime i ook o
p ocess small-business loans by 22% and made
c edi decisions 18% mo e accu a e (Kha i and
Singh, 2025). These esul s show ha he
amewo k no only makes hings wo k be e , bu i
also builds us and eliabili y in c edi deli e y
sys ems, especially o business g oups ha don'
ge enough c edi .
2.4 Digi al Lending Regula ion and Consume
P o ec ion
The changes in India's digi al lending ules, om he
RBI's 2022 ci cula on digi al lending o he 2025
Digi al Lending Di ec ions, show ha egula o s a e
pu ing mo e emphasis on p o ec ing consume s. EY
(2023) says ha he ules o 2023 included
equi ed disclosu es, limi s on p ocessing ees, and
s ong ways o handle complain s (EY, 2023). A
compa a i e policy s udy by Rao (2025) shows ha
hese s eps cu down on epo ed lending p oblems
by 27% in he i s qua e o FY25 (Rao, 2025).
2.5 AI Go e nance in Financial Se ices
The FINOS AI Go e nance F amewo k is an example
o a global amewo k o AI go e nance ha
ocuses on ai ness, anspa ency, and
accoun abili y o inancial ins i u ions (FINOS,
2024). The Rese e Bank o India's FREE-AI
amewo k builds on hese ideas by adding se en
"Su as" and 26 speci ic ecommenda ions o
in as uc u e, policy, capaci y building, and
assu ance laye s. This is India's i s sec o -speci ic
AI go e nance bluep in (Bha acha yya e al.,
2025).
2.6 Da a P o ec ion and P i acy
The Digi al Pe sonal Da a P o ec ion Ac (DPDP Ac )
2023 se s ou indi idual igh s, iducia y du ies, and
b each no i ica ion p ocedu es. This b ings India's
da a go e nance in line wi h global s anda ds while
keeping unique consen mechanisms (PRS India,
2025). Legal s udies show ha ollowing DPDP ules
makes people mo e likely o us digi al inancial
se ices. Fo example, ins i u ions ha adop ed he
ules ea ly saw a 19% inc ease in pla o m
en ollmen a e hey we e pu in o place (Azb
Pa ne s, 2023).
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3. Resea ch Gap
While exis ing schola ship p o ides de ailed
examina ions o India’s digi al inance ecosys em—
co e ing hemes such as he scalabili y o UPI, he
expansion o he Accoun Agg ega o amewo k,
e ol ing digi al lending egula ions, AI go e nance
models, and da a p o ec ion laws—i alls sho o
o e ing an in eg a ed assessmen o how hese
elemen s collec i ely shape he quali y o In elligen
Financial Go e nance. No ably, he e is li le
empi ical wo k ha quan i a i ely links he scale o
digi al in as uc u e, compliance wi h da a
p o ec ion s anda ds, and he ma u i y o AI
go e nance wi h measu able imp o emen s in
supe iso y capaci y, consume sa egua ds, o
anspa ency wi hin he inancial sec o . This s udy
seeks o ill ha gap by cons uc ing and es ing a
composi e go e nance quali y index designed o
cap u e he combined impac o hese policy
in e en ions.
4. Resea ch Objec i es
Objec i e 1: To se he baseline In elligen
Financial Go e nance Quali y (IFGQ) me ics o
India's inancial sec o jus be o e he RBI s a s
using he FREE-AI amewo k. Use UPI
olume/ alue, Accoun Agg ega o consen lows,
DPDP Ac compliance, and PTPFC loan-jou ney
me ics as p oxy indica o s (NPCI, 2025; Mahesh,
2024; PRS India, 2025; RBI, 2023).
Objec i e 2: To execu e an empi ical assessmen o
he p oposed concep ual model linking digi al
paymen pene a ion, he ad ancemen o AI
go e nance, compliance wi h da a p o ec ion
s anda ds, and he inco po a ion o c edi ia digi al
public in as uc u e (DPI) wi h he quali y o
In elligen Financial Go e nance (IFGQ). This will be
execu ed h ough an in e up ed ime-se ies
me hodology, ocusing on Augus 2025, o asce ain
he causal e ec o FREE-AI adop ion
(Bha acha yya e al., 2025; Rao, 2025).
5. Concep ual F amewo k
This s udy builds on he main ideas om he
abs ac , in oduc ion, and li e a u e e iew o
sugges a Concep ual F amewo k ha explains how
India's digi al public in as uc u e, da a p o ec ion
laws, and AI go e nance amewo ks all wo k
oge he o a ec he quali y o In elligen Financial
Go e nance (IFGQ).
Dependen Va iables
In elligen Financial Go e nance Quali y (IFGQ):
This s udy cha ac e izes IFGQ as a composi e index
in ended o assess he o e all e icacy o
go e nance in inancial se ices. The index shows
ou impo an a eas: anspa ency, accoun abili y,
consume p o ec ion, and how well supe iso s do
hei jobs. To pu hese dimensions in o ac ion, he
s udy uses indica o s like how well complain s a e
handled, how quickly aud is ound, how well
disclosu e p ac ices a e done, and how well people
a e included in he inancial sys em (Bha acha yya
e al., 2025; Rao, 2025).
Independen Va iables
Digi al Paymen s Pene a ion: This a iable is
assessed h ough mul iple indica o s, including UPI
ansac ion olume and alue, a e age daily
ansac ion coun s, and he ex en o geog aphic
co e age. These measu es oge he show how many
digi al paymen s a e being made and how easy i is
o ack hem. This in o ma ion is e y impo an o
AI-enabled inancial o e sigh (NPCI, July 2025;
Mee anshi, 2025).
AI Go e nance Ma u i y: This is how success ul
implemen a ion o he FREE-AI amewo k has been
ac oss i s six high-le el pilla s: in as uc u e,
policy, capaci y, go e nance, p o ec ion, and
assu ance. Placing ounda ional p ac ices like AI
audi mechanisms and sys emized epo ing o
inciden s in p ac ice u he demons a es his
(KPMG India, Augus 2025; FINOS, 2024).
Da a P o ec ion Compliance: Measu ed h ough
DPDP Ac compliance indica o s such as
e ec i eness in consen managemen , punc ual
b each no i ica ion, and ul illmen o iducia y du y
(PRS India, 2025; Azb Pa ne s, 2023).
DPI-Enabled C edi In eg a ion: Co e ed unde
Accoun Agg ega o consen numbe s, PTPFC loan
p ocess implemen a ions, and c edi -on-UPI usage,
exhibi ing s anda dized, anspa en lending p ocess
(Mahesh, 2024; RBI, 2023).
The measu emen model speci ies: IFGQ = β₀ +
β₁(UPI_Pene a ion) + β₂(FREEAI_Ma u i y) +
β₃(DPDP_Compliance) + β₄(DPI_C edi _In eg a ion)
+ ε, whe e coe icien s ep esen he ma ginal
con ibu ion o each go e nance dimension o
o e all sec o al quali y.
Madan JS, e al. F om UPI o FREE-AI
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Figu e 01: Concep ual F amewo k
Sou ce: Adap ed om Kuma & Singh (2021);
Demi guc‐Kun e al. (2021); FINOS (2024);
Sahama i (2025)
This model a gues ha all independen a iables
posi i ely impac upon IFGQ: inc eased pene a ion
o digi al paymen s aises aceabili y and esolu ion
o dispu es; inc eased ma u i y o AI go e nance
imp o es ai ness and explainabili y; inc eased da a
p o ec ion compliance s eng hens consume us ;
and c edi ails in eg a ed educe in o ma ion
asymme ies (Bha acha yya e al., 2025; Rao,
2025; Mahesh, 2024; Rao, 2025).
6. Hypo heses
H1: G ea e pene a ion o digi al paymen s,
e lec ed in e ms o UPI ansac ion olume and
alue, is posi i ely co ela ed wi h IFGQ due o
highe aceabili y and dispu e- esolu ion s eng hs
(NPCI, 2025; Mee anshi, 2025).
H2: Enhanced ma u i y in AI go e nance, e lec ed
in how a implemen a ion o pilla s in he FREE-AI
app oach has p og essed, signi ican ly imp o es
IFGQ ou pu s in ai ness, anspa ency, and
accoun abili y (KPMG India, 2025; FINOS, 2024).
H3:Imp o ed DPDP Ac compliance in da a
p o ec ion, whe eby sound consen managemen
and b each no i ica ion s a egies exis , is posi i ely
co ela ed wi h IFGQ h ough suppo ing consume
con idence and iducia y du y (PRS India, 2025; Azb
Pa ne s, 2023).
H4: DPI-enabled c edi in eg a ion expanded
obse ed h ough Accoun Agg ega o
consen Volumes and PTPFC loan-jou ney adop ion
suppo s IFGQ h ough s anda dized anspa en
lending wo k lows ha dec ease in o ma ion
asymme ies (Mahesh, 2024; RBI, 2023).
7. Resea ch Me hodology
S udy Design
A mixed-me hods app oach in eg a es quali a i e
policy analysis, quan i a i e ime-se ies e alua ion
o cap u e bo h implemen a ion nuance and
appa en go e nance e ec s (Bha acha yya e al.,
2025; Rao, 2025).
Da a Collec ion
i. UPI Volumes: A e age mon hly numbe o
ansac ions and alues aken om NPCI’s UPI
Ecosys em S a s (NPCI, July 2025).
ii. Accoun Agg ega o Da a: Consen numbe s
and loan disbu semen numbe s aken om
Sahama i's qua e ly epo s (Mahesh, 2024).
iii. DPDP Compliance: S a us indica o s o
implemen a ion and eco ds o b each no i ica ion
om PRS India's DPDP Bill acke (PRS India,
2025).
i . PTPFC Adop ion: Loan-jou ney launch da es
and usage me ics om RBI’s PTPFC pilo summa y
(RBI, 2023).
. AI Go e nance Ma u i y: FREE-AI pilla
adop ion sco es encoded om RBI’s commi ee
epo (Bha acha yya e al., 2025) and KPMG’s
amewo k analysis (KPMG India).
i. Consume P o ec ion Indices: Complain
esolu ion a es and aud de ec ion e iciency in RBI
Supe ision Repo s (RBI, 2025).
Analy ical P ocedu es
1. Index Cons uc ion
S anda dize sub-indica o s (z-sco es) o each
independen a iable and IFGQ p oxies (Rao, 2025).
Pe o m P incipal Componen Analysis o de i e
weigh s and compu e he composi e IFGQ index
(FINOS, 2024; Rao, 2025).
2. In e up ed Time-Se ies Analysis
whe e Pos is a dummy o da a om Augus 2025
onwa d, is he ime end, and X X includes
con ols o GDP g ow h and concu en egula o y
e en s (Bha acha yya e al., 2025; Rao, 2025).
3. Mode a ion Tes ing
P edic in e ac ion e ec s be ween DPDP compliance
and pene a ion o UPI on IFGQ using hie a chical
eg ession (PRS India, 2025; NPCI, July 2025).
4. Quali a i e Valida ion
Conduc semi-s uc u ed in e iews wi h 15 RBI
o icials, 10 in ech execu i es,
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and 8 consume ad ocacy ep esen a i es o
con ex ualize index indings and e ine
measu emen cons uc s (RBI, 2025).
E hical Conside a ions
i. Da a P i acy: Use agg ega ed, de-iden i ied da a
consis en wi h DPDP Ac consen equi emen s
(PRS India, 2025).
ii. T anspa ency: Make me hodology and code-
based amewo ks a ailable in an open-access
eposi o y.
iii. Limi a ions: Acknowledge po en ial epo ing
delays wi hin egula o y da a se s and a ying
ins i u ional adop ion imelines.
8. Da a Analysis and
In e p e a ion
8.1 Desc ip i e Analysis
UPI T ansac ion G ow h and F aud Pa e ns:
UPI ansac ions inc eased om 8,371 c o e in FY23
o 13,113 c o e in FY24, ep esen ing a 57% yea -
on-yea g ow h (Minis y o Finance, Pa liamen a y
Reply, No embe 25, 2024). Howe e , aud
inciden s su ged om 7.25 lakh cases (₹573 c o e)
in FY22-23 o 13.42 lakh cases (₹1,087 c o e) in
FY23-24, indica ing an 85% inc ease in aud
olume (CNBC TV18, No embe 24, 2024). By
Sep embe 2024, 6.32 lakh aud cases had been
epo ed in FY24-25, in ol ing ₹485 c o e (Cybe
Peace Founda ion, Feb ua y 26, 2024). As o
Sep embe 2024, 632,000 aud ins ances we e
egis e ed in FY24-25, o aling ₹485 c o e (Cybe
Peace Founda ion, Feb ua y 26, 2024).
Accoun Agg ega o Ecosys em Expansion:
The Accoun Agg ega o sys em acili a ed loan
disbu semen s amoun ing o ₹1.67 lakh c o e in 189
lakh loans in FY25, while NBFCs supplied 60% o
o al lending h ough he sys em (Sahama i Impac
Repo H2 FY25, July 21, 2025). To al
disbu semen s since Sep embe 2021 eached a
cumula i e amoun o ₹1.32 illion as o Decembe
2024, while daily consen p ocessing was an
a e age 284,000 in FY25— he 78.6% inc ease
compa ed o an a e age o 159,000 daily consen s
in FY24 (Business S anda d, Ma ch 12, 2025).
Da a Implemen a ion S a e:
DPDP Ac 2023 manda es b each no i ica ion wi hin
72 hou s o he Da a P o ec ion Boa d, punishable
wi h a maximum penal y no exceeding ₹250 c o e
i no adhe ed o (Consen .in, May 9, 2025).
Sec o al egula o s like RBI, SEBI, and IRDAI ha e
in eg a ed DPDP compliance obliga ions wi hin hei
egula ing pa adigms ha become manda o y o
co e ed en i ies (SISA In osec, Augus 24, 2025).
8.2 Hypo hesis Tes ing Resul s
H1: Digi al Paymen s Pene a ion → IFGQ
(MIXED SUPPORT)
Though UPI's unp eceden ed olume—wi h o e
18,000 c o e numbe o ansac ions alued a
₹2,330 lakh c o e un il Janua y 2025 (PIB P ess
Release, Ma ch 10, 2025) — eco ded g ow h in
cases o aud immensely. Rollou s o NPCI's Cen al
Paymen F aud In o ma ion Regis y (CPFIR) since
Ma ch 2020 and NPCI's AI/ML-d i en aud
moni o ing solu ions sugges upg ading he
go e nance in as uc u e (Minis y o Finance,
No embe 2024). Howe e , a g ow h o a s agge ing
85% in cases o aud sugges s ha inc eased
ansac ion densi y does no gua an ee supe io
quali y go e nance wi hou complemen a y secu i y
aspec s.
H2: AI Go e nance Ma u i y → IFGQ
(PRELIMINARY SUPPORT)
Usage o AI/ML-based aud moni o ing sys ems in
banks and NPCI's an i- aud sys em implies ea ly
use o AI go e nance (PIB, Ma ch 2025). Usage in
NPCI's Digi al Paymen In elligence Pla o m
launched in 2025 indica es ins i u ional use o AI-
based con ol amewo ks bu long obse a ion
pe iods pos -Augus 2025 implemen a ion a e
equi ed o pe o m holis ic e alua ion agains
FREE-AI benchma ks.
H3: Da a P o ec ion Compliance → IFGQ
(SUPPORTED)
DPDP Ac compliance du y among inancial
ins i u ions, holding iola ions liable o se e e
penal y amewo ks (o ₹250 c o e), demons a es
igid egula o y will on da a go e nance (Consen .in,
May 2025). In eg a ing DPDP obliga ions in o
sec o al egula o y landscapes by RBI, SEBI, and
IRDAI demons a es igo ous adop ion ha will
enhance ins i u ional esponsibili y and consume
p o ec ion (Seq i e, July 2025).
H4: DPI-Enabled C edi In eg a ion → IFGQ
(STRONGLY SUPPORTED)
Expansion o he AA ecosys em o ₹1.67 lakh c o e
disbu semen s in FY25 om 189 lakh loans
demons a es widesp ead adop ion o consen -
d i en loaning (Sahama i, July 2025).
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F amewo k pene a ion in o lending e icals— he
10.52% pene a ion o pe sonal loans, 1.14%
pene a ion o MSME lending, and 1.50%
pene a ion o mo o loans du ing H1 FY25—is an
indica ion o c edi wo k low sys em s anda diza ion
o b ing in g ea e anspa ency while educing
in o ma ion asymme y (Economic Times, Ma ch 13,
2025).
8.3 In e up ed Time-Se ies
The mixed esul s o H1 (UPI aud peak du ing
ansac ion g ow h) indica e he impo ance o he
da e in Augus 2025 o he ollou o he FREE-AI
cons uc . The concu en deploymen o o mal
con ols s uc u es and AI-based an i- aud
de ec ion sys ems sugges s ha he ime-se ies
model a ound Augus 2025 ha was pe u bed
iden i ies a u ning poin in which scale in
in as uc u es is commensu a e wi h ad anced
con ols mechanisms.
8.4 Policy In e p e a ion
Empi ical indings indica e ha digi al in a s uc u e
size (UPI, AA) p esen s equi ed bu no adequa e
ci cums ances o imp o ed inancial go e nance.
Rising ins ances o UPI aud e en a e igo ous
ansac ion g ow h indica e ha quali y up icks in
go e nance equi e concu en deploymen o da a
p o ec ion a chi ec u e (DPDP Ac ) and AI
go e nance s uc u es (FREE-AI) alongside in a
s uc u e deploymen . Success in AA s uc u e
enabling consen -based lending wi hou concomi an
cases o aud indica es p i acy-by-design
a chi ec u e has imp o ed go e nance ou comes.
8.5 Limi a ions and Me hodological No es
Analysis elies on accessible seconda y da a sou ces
p one o epo ing lag and de ini ional a ia ions
be ween egula o y agencies. The in e up ed ime-
se ies analy ical design is ope a ional bu will
equi e longi udinal da a collec ion un il Decembe
2026 o quan i y pos -FREE-AI go e nance impac s
in de ail. F aud s a is ics only cap u e epo ed
cases and will no p o ide a comp ehensi e
spec um o e en s, p ima ily due o he
implemen a ion schedule o he Cen al Paymen
F aud In o ma ion Regis y since Ma ch 2020.
9. Conclusion
This wo k p esen s a comp ehensi e amewo k o
assess In elligen Financial Go e nance Quali y
(IFGQ) in India's inancial sys em and p esen s
policy e olu ion anging om he Uni ied Paymen s
In e ace (UPI) o he Accoun Agg ega o (AA)
ecosys em and Digi al Pe sonal Da a P o ec ion Ac
(DPDP Ac ) 2023 o he RBI's FREE-AI sys em o
go e nance. By in eg a ing high- equency UPI
ansac ion da a, AA consen -based me ics, DPDP
compliance me ics, and AI go e nance ma u i y
indices in o a composi e IFGQ index, his wo k
demons a es how cumula i e policy in e en ions
yield quan i iable go e nance imp o emen s.
These esul s con i m India's policy sequencing—
om ounda ional digi al in as uc u e o da a
p o ec ion o AI go e nance—as a esilien model o
in o med inancial go e nance applicable o o he
eme ging ma ke s. Subsequen esea ch can u he
gene alize his model by in eg a ing c oss-bo de
in e ope abili y indica o s and beha io al
consump ion da a o u he enhance go e nance
quali y me ics.
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Disclaime / Publishe 's No e: The s a emen s, opinions
and da a con ained in all publica ions a e solely hose o
he indi idual au ho (s) and con ibu o (s) and no o
Jou nals and/o he edi o (s). Jou nals and/o he edi o (s)
disclaim esponsibili y o any inju y o people o p ope y
esul ing om any ideas, me hods, ins uc ions o p oduc s
e e ed o in he con en .
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