LIMITS ON UPI TRANSACTIONS
1. Context
- As transactions facilitated by the Unified Payments Interface (UPI) breach record highs, banks have opted for daily limits.
- These are over and above the already imposed ceilings mandated by the facilitator, the National Payments Corporation of India (NPCI), in 2021.
- The idea is to sustain the smoother functioning of the payments interface as it continues to acquire popularity.
2. Conversation about daily limits
- At present, users can make up to 20 transactions or ₹ 1 lakh in a single day either all at once or throughout the day.
- For certain specific categories of transactions such as the capital markets, collections (such as bills, among others), insurance and forward inward remittances, the limit is ₹ 2 lakh.
- In December 2021, the limit for the UPI-based ASBA (Application Supported by Blocked Amount) IPO and retail direct schemes was increased to ₹ 5 lahks for each transaction.
- The conversation now revolves around banks and apps coming up with their guidelines for transactions.
- For example, state-run lenders Punjab National Bank (PNB) and Bank of Baroda have set their transaction limit at a much lower ₹ 25, 000.
- PNB's daily limit is ₹50, 000.
- As for apps, among others, Google Pay users breach the daily limit if they try to send money more than ten times in a single day across all UPI apps.
- As the payments interface looks to expand its footprint (recall the boarding of nonresident accounts having international numbers into the ecosystem) and its growing utility in daily lives, limits would help maintain an essential security infrastructure and its seamless functioning.
- This is also important as the interface looks to expand its use case, as also called for in the proposed pilot project for coin vending machines with UPI as the facilitator.
3. Limits on transactions
- The limits are set to balance out customer convenience and potential fraud/risk concerns.
- The NPCI has also increased the value limit in specific categories where the average transaction value is higher such as Capital Markets or Credit Card bill Payments.
- As for the moves impacting future growth, "All the ecosystem participants, the NPCI and the regulator regularly review the transaction and value limits on UPI and implement the required changes where the need exists referring to the higher limits for IPOs, Broking, Mutual Funds, Loan repayment etc.
4. Concerns on UPI
- In May 2023, the total number of transactions facilitated using UPI increased to 9 415.19 million.
- The combined value of such transactions also increased at a largely similar ₹ 14.89 lakh crore.
- The segregation in terms of P2P (peer-to-peer) and P2M (Peer to Merchant) is particularly interesting.
- In terms of volume, whilst P2P accounted for about 43 per cent at 4, 045.48 million in terms of value its share scaled up to ₹11.45 lakh crore.
- In the P2P category, the majority of the transactions were in the below ₹500 bracket (54.2 per cent) whilst in the P2M category, the share in the same amount bracket stood at 84.3 per cent.
- This indicates its lower-down utility.
- Important to note that considering the varied nature of merchants and businesses, the nature of transactions can be categorised in favour of one whilst it should be on the other side.
- However, important to note in this context, until February of the financial year 2022-23, the total number of reported UPI frauds had also increased by about 13 per cent in comparison to the previous financial year to 95, 402.
- However, this was alongside a decline in fraud to sales ratio at 0.0015 per cent.
- Thus, to combat the growing incidences, there is an imperative need to safeguard infrastructure in a growing ecosystem.
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For Prelims: Unified Payments Interface, National Payments Corporation of India, Application Supported by Blocked Amount, IPO, Google Pay, Punjab National Bank, Capital Markets, Mutual Funds, Loan repayment, P2P, P2M,
For Mains:
1. What is Unified Payments Interface (UPI)? Discuss the need for limits on UPI transactions. (250 Words)
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Previous Year Questions
1. Which of the following is a most likely consequence of implementing the 'Unified Payments Interface (UPI)'? (UPSC 2017)
A. Mobile wallets will not be necessary for online payments.
B. Digital currency will totally replace the physical currency in about two decades.
C. FDI inflows will drastically increase.
D. Direct transfer of subsidies to poor people will become very effective.
Answer: A
2. With reference to digital payments, consider the following statements: (UPSC 2018)
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?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: A
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Source: The Hindu
