Limits on UPI Transactions

• 10 Jun 2023

Why In News?

With record rise in Unified Payments Interface(UPI) transactions, Banks and UPI apps have decided to impose daily limits on UPI transactions on top of the limits set by the National Payments Corporation of India (NPCI) in 2021.

What Limits have been Imposed on UPI Transactions?

• Limits by NPCI:
  • Currently, users can make up to 20 transactions or ₹1 lakh in a single day, either all at once or throughout the day.
  • Certain specific categories of transactions, such as capital markets, collections, insurance, and forward inward remittances, have a higher limit of ₹2 lakh.
  • For UPI-based ASBA (Application Supported by Blocked Amount system) IPO and retail direct schemes, the limit for each transaction was increased to ₹5 lakh in December 2021.
    • ASBA is a facility for investors to participate in Initial Public Offerings (IPOs) and invest in the stock market.
      • It enables investors to apply for shares without transferring the funds upfront to the IPO issuer or stockbroker. Instead, the investor's application money is temporarily blocked in their bank account until the shares are allotted.
• Limits by Banks/Apps:
  • Some banks and apps have set their own transaction limits.
    • For example, Punjab National Bank (PNB) and Bank of Baroda have a lower limit of ₹25,000, with PNB's daily limit being ₹50,000.
    • Google Pay users face a breach of the daily limit if they attempt to send money more than ten times in a single day across all UPI apps.

What is the Significance of Limits?

• The imposition of limits helps maintain the security infrastructure of UPI and ensures its seamless functioning.
• Limits assist in preventing potential fraud and risk concerns while balancing customer convenience.
• Higher limits are set for specific categories with higher average transaction values, such as capital markets or credit card bill payments.

What are the Most Recent Trends Observed with respect to UPI? 

• In May,2023, the total number of transactions facilitated using UPI reached 9,415.19 million, with a combined value of ₹14.89 lakh crore.
• Share of P2P (peer-to-peer) transactions among total UPI transactions is about 43%, while the rest are P2M (peer-to-merchant).
• In the P2P category, the majority of transactions were in the below ₹500 bracket (54.2%), while in the P2M category, the share in the same amount bracket was 84.3%.

What is National Payments Corporation of India (NPCI)?

• It is an umbrella organisation for operating retail payments and settlement systems in India.
• It is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007.
• It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013).
• The ten core promoter banks are State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC.
• In 2016 the shareholding was broad-based to 56 member banks to include more banks representing all sectors.

UPSC Civil Services Examination, Previous Year Question (PYQ)

Q1. With reference to digital payments, consider the following statements: (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

Ans: (a)

Q2. Which of the following is a most likely consequence of implementing the ‘Unified Payments Interface (UPI)’? (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.

Ans: (a)

Q3. Consider the following statements: (2017)

1. National Payments Corporation of India (NPCI) helps in promoting the financial inclusion in the country.
2. NPCI has launched RuPay, a card payment scheme.

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

Ans: (c)

Source:TH