The recent spike in Unified Payments Interface (UPI) transactions has led to banks and UPI apps introducing daily transaction limits beyond those established by the National Payments Corporation of India (NPCI) in 2021.
Understanding UPI Transaction Limits
NPCI, the governing body for retail payments and settlement systems in India, currently allows a maximum of 20 UPI transactions or ₹1 lakh per day. This limit applies cumulatively throughout the day and not on individual transactions. Specific transactions such as capital markets, collections, insurance, and inward remittances, however, are entitled to a higher limit of ₹2 lakh.
To facilitate participation in Initial Public Offerings (IPOs) and stock market investments through the Application Supported by Blocked Amount (ASBA) system, the NPCI increased the per-transaction cap to ₹5 lakh in December 2021.
This feature allows investors to apply for shares in IPOs without having to transfer funds upfront to the IPO issuer or broker. The amount required is instead blocked in the investor’s account until the allocation of shares.
Banks and UPI Apps Set Their Own Limits
Certain banks and UPI apps have defined their own transaction limits. For instance, Punjab National Bank (PNB) and Bank of Baroda have a lower per transaction limit of ₹25,000, with PNB’s daily limit capped at ₹50,000. Meanwhile, Google Pay users may face a breach of the daily limit if they attempt over ten transactions in a single day across all UPI apps.
The Role of Transaction Limits
Transaction limits are crucial for maintaining the security of UPI and ensuring its smooth operation. They help in mitigating potential fraud and risk concerns while maintaining customer convenience. Higher limits are typically associated with transaction categories that involve larger amounts, such as capital markets or credit card payments.
Latest Trends in UPI Transactions
In May 2023, UPI was used to facilitate a total of 9,415.19 million transactions amounting to ₹14.89 lakh crores. Peer-to-peer (P2P) transactions accounted for about 43% of these transactions, while the remaining were peer-to-merchant (P2M). Within the P2P category, most transactions fell below the ₹500 bracket (54.2%), and for P2M, this figure was 84.3%.
About National Payments Corporation of India (NPCI)
The NPCI is an umbrella organisation that oversees retail payment and settlement systems in India. This initiative by the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) operates as a non-profit company under the provisions of Section 8 of the 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, their shareholding was diversified to include 56 member banks, thereby ensuring representation from all banking sectors.
Previous Year Questions on Digital Payments
In previous UPSC Civil Services Examinations, questions pertaining to digital payments have been addressed. For example, in the 2018 exam, candidates were quizzed about the security features of the BHIM app and the UPI-enabled transfer process. Similarly, in 2017, they were asked about the potential consequences of implementing UPI and the role of the NPCI in promoting financial inclusion.
Last Modified: February 20, 2024