During its recent Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) announced significant enhancements to the Unified Payments Interface (UPI) system, aiming to improve digital payment accessibility and convenience for millions of users across the nation. The central bank has decided to increase the transaction limits for two vital UPI services—UPI 123Pay and UPI Lite—thereby facilitating easier financial transactions for a broader audience.
RBI Governor Shaktikanta Das elaborated on these changes, emphasizing that they reflect the transformative power of UPI in reshaping India’s financial landscape. He stated that UPI has made digital payments more inclusive and accessible through continuous innovation and adaptation. To foster even wider adoption of UPI, the RBI has doubled the per-transaction limit for UPI 123Pay from Rs 5,000 to Rs 10,000, significantly benefitting the estimated 400 million feature phone users in India. This adjustment is especially impactful given that many of these users may not have access to smartphones or reliable internet connections. Furthermore, the limit for UPI Lite wallets has been raised from Rs 2,000 to Rs 5,000, allowing users to manage small-value transactions more effectively. The per-transaction limit for UPI Lite has also been increased from Rs 500 to Rs 1,000, further simplifying the process for those engaging in low-value digital transactions.
These changes are particularly pertinent in improving the accessibility and efficiency of digital payments across India, ensuring that users from diverse backgrounds can engage with these financial services without the constraints that typically accompany traditional banking systems. By enhancing these transaction limits, the RBI aims to bolster the usage of digital payments, catering specifically to the needs of users who may have limited access to advanced technology or high-speed internet services.
Launched in March 2022, UPI 123Pay was developed by the RBI in partnership with the National Payments Corporation of India (NPCI) to assist those utilizing feature phones in accessing digital payment solutions. Unlike standard UPI services, which necessitate the use of smartphones and reliable internet connectivity, UPI 123Pay enables transactions through straightforward methods designed specifically for feature phone users. This initiative plays a crucial role in advancing the government’s objectives for financial inclusion by expanding the reach of digital payment systems to a larger segment of the population, thereby promoting economic empowerment.
UPI 123Pay operates through four innovative methods, each designed to facilitate transactions in a user-friendly manner. The first method is Interactive Voice Response (IVR), which allows users to call a pre-set number and follow voice prompts in multiple languages to complete their payments. The second method is Missed Call Transactions, where users can place a missed call to a merchant-specific number and then receive a call back to authenticate the payment using a UPI PIN. The third method involves app-based payments for feature phones, offering a simplified UPI application that provides basic functionalities such as sending and receiving money. Lastly, Proximity Sound-based Payments allow users to tap their phone on a merchant device, utilizing sound waves to enable contactless payments.
For feature phone users, setting up UPI 123Pay is a straightforward process. They can initiate the setup by dialing *99#, selecting their bank, and following the instructions provided to link their accounts. To complete the setup, users will need to enter their debit card details to create a UPI PIN. Once this is done, they can begin making secure transactions without the need for internet access.
UPI Lite was introduced as a solution to streamline small-value transactions, making them more convenient for everyday users. With the wallet limit now increased to Rs 5,000, users can store money directly on their devices, significantly expediting the transaction process. This enhancement eliminates the need to access a bank server for each transaction, allowing for quicker payments for daily purchases, such as groceries and transport fares. UPI Lite is expected to simplify frequent small transactions, particularly in areas where internet connectivity may be limited, thus enhancing the overall user experience.
In addition to these changes regarding UPI limits, the RBI's MPC has decided to maintain the repo rate at 6.5%, marking the tenth consecutive meeting where rates have remained unchanged. Governor Das emphasized that this consistent rate allows the RBI the flexibility needed to adapt to changing economic conditions. The central bank aims to keep inflation within the target of 4%, although it acknowledges the presence of ongoing inflationary pressures stemming from global factors, such as rising energy costs and geopolitical tensions that could influence local economic conditions.
The RBI reiterated its GDP growth projection for the fiscal year 2025 (FY25) at 7.2%, with quarterly estimates indicating a steady growth trajectory. The projections for GDP growth in specific quarters include 7% for Q2 FY25, 7.4% for both Q3 FY25 and Q4 FY25, and 7.3% for Q1 FY26. As for inflation, the central bank has maintained its target at 4.5% for FY25, while also acknowledging the risks posed by fluctuating food prices, rising crude oil costs, and other geopolitical factors that may impact the overall economic landscape. The MPC's projections suggest that inflation may reach 4.1% in Q2 FY25, rise to 4.8% in Q3, and then drop slightly to 4.3% in Q1 FY26.
In summary, the RBI's recent measures represent a strategic approach to enhance digital payment systems while balancing inflation control and supporting economic growth. By increasing transaction limits for UPI services, the RBI is not only facilitating a more inclusive financial environment but also reaffirming its commitment to advancing digital innovation within India’s financial landscape. This holistic approach aims to empower users from diverse backgrounds and improve their access to essential financial services, ultimately contributing to a more robust and resilient economy.
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