RBI permits NPCI to enhance transaction limits in UPI for P2M payments

UPI is a real-time payment system used for sending and receiving money between bank accounts using a mobile app.

Mumbai: The Reserve Bank of India (RBI) on Wednesday permitted NPCI to upwardly revise transaction limits in UPI for person-to-merchant payments (P2M) based on evolving user needs.

National Payments Corporation of India (NPCI) is an umbrella organisation for operating retail payments and settlement systems in India.

UPI or Unified Payments Interface is a real-time payment system used for sending and receiving money between bank accounts using a mobile app.

At present, the transaction amount for UPI, covering both Person to Person (P2P) and Person to Merchant payments (P2M), is capped at Rs 1 lakh except for specific use cases of P2M payments which have higher limits, some at Rs 2 lakh and others at Rs 5 lakh.

"To enable the ecosystem to respond efficiently to new use cases, it is proposed that NPCI, in consultation with banks and other stakeholders of the UPI ecosystem, may announce and revise such limits based on evolving user needs," RBI Governor Sanjay Malhotra said.

Appropriate safeguards will be put in place to mitigate risks associated with higher limits, he added.

Banks shall continue to have the discretion to decide their own internal limits within the limits announced by NPCI, the governor added.

P2P transactions on UPI, however, will continue to be capped at Rs 1 lakh, as hitherto.

Governor Malhotra announced that the RBI proposes to review the guidelines for lending against gold jewellery.

Loans against the collateral of gold jewellery and ornaments are extended by regulated entities (REs) for both consumption and income-generation purposes.

Prudential and conduct related regulations for these types of loans have been issued from time to time and they vary for different categories of REs.

"With a view to harmonising such regulations across REs while keeping in view their risk-taking capabilities, and also to address a few concerns that have been observed, it has been decided to issue comprehensive regulations, on prudential norms and conduct related aspects, for such loans," the governor said.

The draft guidelines in this regard will be issued for public comments.

The Reserve Bank has also proposed to make the Regulatory Sandbox (RS) framework 'theme neutral' and 'on tap' to foster continuous innovation and keep pace with the rapidly evolving fintech/regulatory landscape.

RBI has been operating the RS framework since 2019, and four specific thematic cohorts have been announced and completed till date.

An 'on tap' application facility for themes of closed cohorts was announced in October 2021.

A fifth 'theme neutral' cohort with a specified time window for receiving applications was also announced in October 2023, which will close in May 2025.

Under this cohort, any innovative product or solution within the regulatory ambit of RBI could be tested if found eligible.

"Based on the experience gained and feedback received from stakeholders, it is now proposed to make the regulatory sandbox 'theme neutral' and 'on tap'," Malhotra said.

The central bank will also issue a draft framework for securitisation of stressed assets. The proposed framework intends to enable securitisation of stressed assets through a market-based mechanism, in addition to the existing ARC route under SARFAESI Act, 2002.

The governor also announced a decision to expand the scope for co-lending and issue a generic regulatory framework for all forms of co-lending arrangements among REs.

The extant guidelines on co-lending are applicable only to arrangements between banks and NBFCs for priority sector loans.

"In light of the evolution of such lending practices, and the potential of such lending arrangements in catering to the credit needs of a wider segment in a sustainable manner, it has been decided to expand the scope for co-lending and issue a generic regulatory framework for all forms of co-lending arrangements among REs," he said.

RBI will issue draft guidelines on co-lending arrangements framework.