UPI transaction Limit Raised To Rs 5 Lakh: What Fintech Sector Should Know From RBI Dec 8 Meeting

In a big move, on the concluding day of the three-day RBI Monetary Policy Committee (MPC) meeting, Reserve Bank of India Governor Shaktikanta Das on Friday raised the limit of UPI transactions for specific purposes from Rs 1 lakh to Rs 5 lakh. To encourage the use of UPI for medical and educational services, the limit for payments to hospitals and educational institutions has been increased from Rs 1 lakh to Rs 5 lakh per transaction.

The move has come as a big announcement, at a time when digital transactions have become a popular mode of payment as India moves towards becoming a digital economy. The country's digital economy is expected to surge more than fivefold to USD 1 trillion by 2030, led by a growing appetite for digital products and services, according to a joint research report released on Tuesday by Google, Temasek, and Bain and Company.

Aadhar, United Payments Interface (UPI), and Digilocker have played an instrumental role in unlocking potential in the country's internet economy.

What the RBI Gov said today?

Today, Das said, "The limit for various categories of UPI transactions has been reviewed from time to time. It is now proposed to enhance the UPI transaction limit for payment to hospitals and educational institutions from Rs 1 lakh to Rs 5 lakh per transaction. This will help the consumers to make UPI payments of higher amounts for education and healthcare purposes."

Mr. Pratapsingh Nathani, chairman and MD at Beacon Trusteeship said, "The RBI's steadfast monetary policy, keeping the repo rate at 6.5%, indicates a strategic balancing act between curbing inflation and bolstering economic growth. With the inflation target yet to meet the 4% benchmark, the RBI, under Governor Shaktikanta Das, leans towards a cautious yet growth-oriented policy. The RBI's growth forecast for India at an optimistic 7% points to a confidence in domestic economic resilience, outpacing international projections. Alongside maintaining economic stability, the RBI has made strategic enhancements to the Unified Payments Interface (UPI), raising the transaction cap to Rs 5 lakhs for payments to hospitals and educational institutions, and up to Rs 1 lakh for recurring transactions such as credit card bills, mutual fund subscriptions, and insurance premiums. These increases are set to bolster high-value payment convenience through UPI, with an additional authentication layer for transactions exceeding Rs 1 lakh, thereby supporting larger ecosystem sectors and advancing digital payment adoption."

Mr. Amit Goenka, MD and CEO at Nisus Finance said, "RBI has struck a delicate balance between the conflicting pieces of information offered by oil prices, geopolitical tensions, India's GDP growth and softening inflation worldwide and gone into a further wait and watch mode as it observes asset prices increasing."

What is the limit of fund transfer using UPI?

Prior to today's announcement, for normal UPI the transaction limit was up to Rs 1 Lakh per transaction. For a few specific categories of transaction in UPI like Capital Markets, Collections (Credit card payments, Loan re-payments, EMI), Insurance, and Foreign Inward Remittances the transaction limit was fixed up to 2 lakh and for Initial Public Offering (IPO), and Retail Direct Scheme the limit was set up to Rs 5 lakh per transaction.

The transaction limit for UPI payments for the Retail Direct Scheme and for IPO subscriptions was increased to Rs 5 lakh in December 2021.

e-Mandates for recurring online transactions increased for specified categories:

The e-mandate for making online recurring transactions has been increased from from Rs 15,000 to Rs 1 lakh per transaction for recurring payments of mutual fund subscriptions, insurance premium subscriptions and credit card repayments. This measure is expected to accelerate the usage of e-mandates.

What is UPI?

Unified Payments Interface (UPI) is an instant payment system developed by the National Payments Corporation of India (NPCI), an RBI-regulated entity. UPI is built over the IMPS infrastructure and allows you to instantly transfer money between any two parties' bank accounts.

According to data issued by the National Payments Corporation of India (NPCI), the UPI recorded 11.24 billion transactions in November, reaching a transaction value of Rs 17.40 trillion.

The RBI today announced its decision to keep the repo rate unchanged for the fifth consecutive time at 6.50%. The rate-setting panel also left the policy stance unchanged with a focus on the withdrawal of accommodation.

Commenting on RBI's decision to increase the UPI payment limit for healthcare to Rs 5 lakh, Dr. J.S. Bhawalkar, Dean, Dr. D.Y. Patil Medical College, Hospital and Research Centre, Pune, said, "The decision by the RBI to raise the UPI payment limits for healthcare to 5 lakh is a revered move that will be of significant operational benefits to both hospitals and patients or their families. Earlier, there were restrictions on payment limits, or the payee had to use time-consuming payment methods."

"This change in the e-transaction mandates will enable patients or caretakers to make swift transfers without any hassle in times of emergency. On the other hand, it will also boost transparency and fair play in the healthcare ecosystem," he added.