The story so far:
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.
What is the 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 through 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 lakh for each transaction.
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The conversation now revolves around banks and apps coming up with their own guidelines for transactions. For example, state-run lenders Punjab National Bank (PNB) and Bank of Baroda has set its 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 non-resident 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.
What does the industry think?
Digital payments app PhonePe’s spokesperson told The Hindu, “The limits are set balancing 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.”
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As for the moves impacting the future growth, “All the ecosystem participants, the NPCI and the regulator regularly review the transaction and value limits on UPI and implement the requisite changes where the need exists”, the official said referring to the higher limits for IPOs, broking, mutual funds, loan repayment etc.
What are the most recent trends observed with respect to UPI?
In May this year, 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% at 4,045.48 million, in terms of value its share scaled up to ₹11.45 lakh crore.
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In the P2P category, the majority of the transactions were in the below ₹500 bracket (54.2%) whilst in the P2M category, the share in the same amount bracket stood at 84.3%. This gives an indication of its lower-down utility. Important to note that considering the varied nature of merchants and business, 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 in the financial year 2022-23, the total number of reported UPI frauds had also increased about 13% in comparison to the previous financial year to 95,402. However, this was alongside a decline in the fraud to sales ratio at 0.0015%.
Thus, to combat the growing incidences, there is the imperative need to have safeguard infrastructure in a growing ecosystem.
