The Reserve Bank of India (RBI) plans to lift the transaction limits on its Unified Payments Interface (UPI) system, a move expected to dramatically increase the capabilities of the real-time payments system.
Previously, UPI transactions were capped at Rs 1 lakh (approximately $1,162) for merchant transactions, forcing many users to either split payments for larger purchases or opt for alternative payment methods.
According to the Economic Times, the higher transaction limits will unlock a range of new use cases for UPI. Users could pay their school, college, or hospital bills, or even make a down payment on a car directly through the system.
The change may also benefit international travelers using UPI in countries where it’s accepted. In many of these regions, foreign currencies trade at higher values than the Indian Rupee, further limiting the effective transaction amount under the previous cap.
Though more types of transactions will now be possible, the RBI confirmed that it doesn’t plan to raise the transaction cap on peer-to-peer payments through UPI, which still stands at Rs 1 lakh.
Entrenching the System
UPI has become the predominant payment method in India, thanks to its instant transactions and often fee-free structure. However, while a February report found that transactions on the platform increased by a third year-over-year, the average ticket size decreased by nearly 10%—from roughly $17.50 to $15.85.
By expanding transaction limits, the RBI hopes to reverse this trend—further cementing the payments system’s role in everyday life. The move could also unlock new use cases for small- to medium-sized businesses.
Expanding Beyond Boundaries
Instant payments systems in countries like Brazil and India have expanded beyond simple account-to-account transfers. For example, Brazil’s Pix recently announced plans to include buy now, pay later services on its platform.
On the other hand, the U.S. has been much slower to adopt instant payments because rails like payment cards and ACH transactions have been in place for decades, and there has not been a catalyst to motivate a switch.
However, potential use cases for instant payments in the U.S. have been proposed. One such use case could be for big-ticket purchases. Instead of visiting the bank to obtain a cashier’s check for a large purchase, like a car, the buyer could simply send a real-time payment.
