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RBI Implements Key UPI Changes for 2024: Higher Limits, Enhanced Security

UPI

HIGHLIGHTS:
  • Users get 4-hour window for large transactions, enhancing control.
  • Hospitals, schools now enjoy increased transaction limit to Rs 5 lakh.
  • UPI payments now display recipient bank account names for clearer transactions.

    • The Reserve Bank of India (RBI) has ushered in a new era for Unified Payments Interface (UPI) with transformative changes effective from January 1st, 2024. These adjustments promise to redefine the landscape of online banking and payment transactions, bringing enhanced efficiency and security to users. In this article, we'll delve into the five pivotal changes in UPI that you need to be aware of.

    1. Active UPI IDs:

    Payment apps such as Google Pay and PhonePe are now mandated to verify and maintain the activity of UPI IDs. The National Payments Corporation of India (NPCI) has directed the deactivation of inactive UPI IDs after a year. This measure ensures the security and reliability of UPI transactions, reinforcing the commitment to user protection.

    2. Increased Transaction Limit for Specific Sectors:

    In a significant move, the RBI has raised the UPI transaction limit for hospitals and educational institutions from Rs 1 lakh to Rs 5 lakh. This boost facilitates higher online payments in critical sectors, aligning with the evolving financial needs and requirements. The adjustment follows deliberations in the monetary policy committee meeting, emphasizing the strategic approach towards supporting essential services.

    3. Enhanced Control for First-Time Payments:

    To elevate user control and security, the RBI proposes a 4-hour window for users initiating first payments exceeding Rs 2,000 to new recipients. This window allows users the option for transaction reversal or modification, offering a safeguard against potential errors or unauthorized transactions. This forward-looking measure aims to instill confidence in users, fostering a secure and user-friendly payment environment.

    4. Interchange Fee for Merchant UPI Transactions:

    For specific merchant UPI transactions exceeding Rs 2,000 and involving prepaid payment instruments (PPI), a 1.1 percent interchange fee will be applicable. This fee structure is designed to streamline transactions involving online wallets and ensure a fair and sustainable ecosystem for both merchants and payment service providers. The move is in line with fostering a transparent and equitable financial environment.

    5. Transparent Bank Account Information:

    Starting from the effective date, when users make UPI payments, the actual name of the recipient's bank account will be displayed on the screen. This enhancement adds a layer of transparency to the transaction process, reducing the likelihood of errors and providing users with clear and accurate information about the destination of their funds. It is a step towards reinforcing trust and transparency in digital payments.

    Additional Developments:

    Apart from the aforementioned changes, the National Payments Corporation of India (NPCI) has introduced 'UPI for Secondary Market' in its Beta phase. This initiative allows limited pilot customers to block funds post-trade confirmation and settle payments on a T 1 basis via Clearing Corporations. This move aims to streamline and expedite post-trade processes, enhancing the efficiency of financial transactions.

    In a collaborative effort, Hitachi Payment Services, along with NPCI, has launched India's first UPI-ATM. This innovative solution, currently in the pilot phase, enables cash withdrawal through QR code scanning, providing users with a convenient and secure alternative to traditional ATMs. Plans for a nationwide introduction are in the pipeline, promising widespread accessibility.

    Statistical Update:

    In November 2023, UPI transactions reached a new high in value, totaling Rs 17.4 trillion, marking a 1.4 percent increase from October 2023's Rs 17.16 trillion. Despite a slight decline in the number of transactions by 1.5 percent, dropping to 11.24 billion from the previous month's record high of 11.41 billion, the overall value demonstrates the continued growth and adoption of UPI in the Indian financial landscape.

    Verdict:

    As we witness these transformative changes in UPI, it is evident that the regulatory measures introduced by the RBI are poised to redefine the digital payment landscape. With a focus on security, transparency, and efficiency, these changes aim to elevate the user experience and foster a robust and inclusive financial ecosystem. As users, staying informed about these developments is crucial to making the most of the evolving digital payment landscape.