Ok. So this is what I was able to find. The mandatory permissions typically required by UPI apps are Phone and SMS permissions.
Permissions beyond these such as Contacts are not mandated by UPI or NPCI guidelines for core UPI functionality.
Supermoney app requires mandatory Contacts access for user registration whereas in most other UPI apps it is optional.
As per supermoney app it is to make it easier for users to send money to friends and family.
Screenshot attached