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Q28 (IAS/2018) Economy › Economy Current Affairs › Digital payments ecosystem Official Key

With reference to digital payments, consider the following statements : 1. BHIM app allows the user to transfer money to anyone with a UPI-enabled bank account. 2. While a chip-pin debit card has four factors of authentication, BHIM app has only two factors of authentication. Which of the statements given above is/are correct ?

Result
Your answer: —  ·  Correct: A
Explanation

The correct answer is option A (statement 1 only).

The BHIM app allows users to transfer money to anyone with a UPI-enabled bank account.[1] This makes statement 1 correct. The Unified Payments Interface (UPI), a payment system allowing mobile-enabled money transfers between bank accounts, and the Bharat Interface for Money (BHIM) for a less-cash economy were developed and put to good use, and certainly proved helpful to the citizens.[2]

Statement 2 is incorrect. While the sources mention that a chip-pin debit card has four factors of authentication, the BHIM app will not require any biometric authentication or prior registration with the bank or UPI on the system.[3] However, this does not mean BHIM has only two factors of authentication. BHIM typically uses multiple authentication factors including mobile number verification, UPI PIN, device binding, and potentially other security layers. The claim that BHIM has "only two factors" is therefore inaccurate, making statement 2 incorrect.

Sources
  1. [1] )
  2. [2] Rajiv Ahir. A Brief History of Modern India (2019 ed.). SPECTRUM. > Chapter 39: After Nehru... > Digital India: a Step Forward in e-Governance > p. 778
  3. [3] https://achieversccm.ac.in/wp-content/uploads/2023/01/DR_MAHESH_BHIWANDIKAR.pdf
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Don’t just practise – reverse-engineer the question. This panel shows where this PYQ came from (books / web), how the examiner broke it into hidden statements, and which nearby micro-concepts you were supposed to learn from it. Treat it like an autopsy of the question: what might have triggered it, which exact lines in the book matter, and what linked ideas you should carry forward to future questions.
Q. With reference to digital payments, consider the following statements : 1. BHIM app allows the user to transfer money to anyone with a U…
At a glance
Origin: Books + Current Affairs Fairness: Low / Borderline fairness Books / CA: 3.3/10 · 3.3/10
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Statement 1 is standard current affairs found in basic economy texts (Spectrum/Vivek Singh). Statement 2 is a 'Technical Bluff'—it relies on the definition of Multi-Factor Authentication (MFA). The examiner exaggerated the security of a debit card (claiming 4 factors instead of the standard 2) to create a false contrast with BHIM.

How this question is built

This question can be broken into the following sub-statements. Tap a statement sentence to jump into its detailed analysis.

Statement 1
Digital payments: Does the BHIM app allow a user to transfer money to any UPI-enabled bank account?
Origin: Direct from books Fairness: Straightforward Book-answerable
From standard books
Rajiv Ahir. A Brief History of Modern India (2019 ed.). SPECTRUM. > Chapter 39: After Nehru... > Digital India: a Step Forward in e-Governance > p. 778
Presence: 5/5
“The government also intended to enhance and improve connectivity of all villages and rural areas through internet networks. There is no doubt that e-infrastructure, e-participation, and government e-services were put in place and made to work to improve transparency. The Unified Payments Interface (UPI), a payment system allowing mobile-enabled money transfers between bank accounts, and the Bharat Interface for Money (BHIM) for a less-cash economy were developed and put to good use, and certainly proved helpful to the citizens.”
Why this source?
  • Explicitly links UPI as a payment system that allows mobile-enabled money transfers between bank accounts.
  • Mentions BHIM in the same context as UPI and a tool developed for a less-cash economy, implying BHIM uses UPI for transfers.
Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 2: Money and Banking- Part I > 10.Oversight of payment and settlement systems > p. 71
Presence: 3/5
“• Unified Payments Interface (UPI)• Aadhar Enabled Payment System (AEPS)• Rupay Cards• National Automatic Clearing House (ACH)• Linking of ATMs across India (some other operators are also involved)• National Electronic Toll collection (It provides an electronic payment facility to customer to make the payments at national, state and city toll plazas by identifying the vehicle uniquely through a FASTag) NPCI is a 'Not for Profit' company where 51% stake is owned by public sector banks.”
Why this source?
  • Lists UPI among the core payment and settlement systems overseen in India, indicating an interoperable national infrastructure for such transfers.
  • By describing UPI as a principal payment system (with NPCI involvement), it supports the notion that apps using UPI can move funds across banks.
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Statement analysis

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