RBI Allows NPCI To Revise UPI Limits For Merchant Transactions; P2P Limits Remain Unchanged

In a significant policy update, Reserve Bank of India (RBI) Governor Sanjay Malhotra announced greater flexibility in transaction limits for Person-to-Merchant (P2M) payments on the Unified Payments Interface (UPI), while keeping Person-to-Person (P2P) transaction limits unchanged.

The announcement was made on April 9, 2025, following the conclusion of the three-day meeting of the Monetary Policy Committee (MPC). This move is aimed at enhancing the efficiency and responsiveness of India's fast-evolving digital payment ecosystem.

NPCI Empowered To Decide New UPI Limits

Currently, UPI transactions-whether P2P or P2M-are capped at Rs 1 lakh, except for select P2M use cases where limits extend to Rs 2 lakh or Rs 5 lakh. However, with the rapid rise in UPI adoption for large-scale merchant transactions, especially in sectors like healthcare, education, and travel, a need for more flexibility has emerged.

"To enable the ecosystem to respond efficiently to new use cases, it is proposed that NPCI, in consultation with banks and other stakeholders of the UPI ecosystem, may announce and revise such limits based on evolving user needs," Governor Malhotra stated.

While P2M transaction limits may be adjusted, P2P transactions will continue to be capped at Rs 1 lakh, as per the existing framework.

Risk Mitigation Measures To Accompany Higher Limits

Governor Malhotra emphasized that appropriate safeguards will be implemented to mitigate potential risks associated with higher transaction limits. Furthermore, banks will retain the discretion to set their own internal limits within the maximum cap prescribed by NPCI.

This layered approach ensures security remains a top priority while providing users and merchants the flexibility they need.

What This Means For UPI Users?

1. Fewer Hurdles for High-Value Payments
Currently, users often need to split high-value merchant payments due to UPI's Rs 1 lakh cap. With the proposed flexibility, such payments can be processed in a single transaction, enhancing user convenience and merchant efficiency.

2. Strengthened Security Framework
To ensure a safe transaction environment, the RBI has committed to implementing stronger security protocols alongside any increase in transaction limits. This will help users transact with greater confidence, especially for high-value payments.

3. Smoother International Transactions
As UPI gains traction globally, especially in countries where local currencies are stronger than the Indian rupee, higher transaction limits will facilitate smoother international payments. This will particularly benefit Indian travelers, students, and exporters dealing with UPI-accepted nations.

Other Key Announcements From RBI Governor Sanjay Malhotra

Apart from the UPI-related updates, Governor Malhotra unveiled several policy decisions aimed at enhancing the financial system's resilience and inclusiveness:

1. Framework for Securitisation of Stressed Assets
The RBI proposed a new market-driven mechanism for the securitisation of stressed assets. This will operate alongside the current route involving Asset Reconstruction Companies (ARCs) under the SARFAESI Act, providing more flexibility and transparency in dealing with distressed assets.

2. Uniform Guidelines for Gold-Backed Loans
To bring consistency and accountability, the RBI will issue standardised guidelines for loans backed by gold jewellery and ornaments, which will be applicable across all regulated entities (REs).

3. Regulatory Framework for Co-Lending
A comprehensive framework will be introduced to regulate all forms of co-lending arrangements among REs.

4. Open-Ended Regulatory Sandbox
The RBI is revamping its Regulatory Sandbox (RS) approach by shifting to a theme-neutral, open-ended model, allowing for ongoing innovation without rigid thematic constraints. The fifth cohort, launched in October 2023, is currently accepting applications and will close in May 2025.