Major Update for UPI Users: RBI and NPCI Plan to Increase Merchant Transaction Limit

The Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) began its meeting on April 7, with final decisions announced today, April 9. Over the course of the two-day meeting, key financial policy updates were discussed—including repo rate changes and proposed adjustments to digital transaction limits.

UPI Merchant Transaction Limit May Be Increased

One of the key proposals under consideration is the increase of the transaction limit for Person-to-Merchant (P2M) payments made via UPI, debit cards, and credit cards. These transactions, where a user makes a payment to a merchant, are currently capped at ₹1 lakh.

Now, the RBI is considering raising this limit to ₹5 lakh. While the proposal is still under review and no final decision has been made, this move reflects the growing usage and reliability of digital payments in India.

Why the Change?

According to RBI Governor Sanjay Malhotra, “Given the rising number of UPI users and the increasing trust in the system, we are evaluating the possibility of raising the P2M transaction cap. The limit could be increased from ₹2 lakh to ₹5 lakh.”

To ensure safety in high-value transactions, additional measures to prevent fraud are also expected. While the RBI may set the upper limit at ₹5 lakh, individual banks will retain the authority to define their own transaction caps within this range. Notably, the general UPI transaction limit of ₹1 lakh for person-to-person transfers will remain unchanged.

Repo Rate Reduced Again

The RBI also announced a cut in the repo rate by 0.25%, bringing it down to 6%. This is part of the RBI’s ongoing efforts to manage liquidity and stimulate economic growth. The decision follows a similar repo rate cut made during the MPC’s February meeting.

The repo rate is a crucial monetary policy tool through which the RBI regulates the flow of money in the economy by making borrowing more or less expensive for banks.