RBI Raises Contactless Card Payment, UPI Auto Pay Limits To Rs 5,000 From Jan. 1

The Reserve Bank of India more than doubled the limits for contactless card and recurring payments through multiple modes to further boost cashless transactions.

"In order to expand the adoption of digital payments in a safe and secure manner, it is proposed to enhance, at the discretion of the user, the limits for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from January 1, 2021," Reserve Bank of India Governor Shaktikanta Das said in the monetary policy statement on Friday.

This covers contactless and recurring payments through debit and credit cards, prepaid instruments, wallets, and the Unified Payments Interface.

"The increased limit will also help to boost the average value of transaction and push the adoption of digital payments," said Dilip Asbe, managing director and chief executive at the National Payments Corporation of India.

Besides encouraging more customers to use BHIM (Bharat Interface for Money) UPI to make peer-to-peer and person-to-merchant transactions, he said, the extended limit on the recently launched UPI AutoPay will allow its users to execute high-ticket recurring payments like utility bills, investments and monthly loan installments, seamlessly.

“The physical infrastructure for contactless card payments has already been put in place and is gaining good traction from customers," Deepak Abbot, former executive at Paytm and co-founder of the fintech startup Indiagold, said. "By extending the limit to Rs 5,000, the regulator has ensured that 90% of all the digital transactions in the retail space, especially at the small and medium business outlets, will now get covered.”

The central bank, according to its ‘Vision Document on Payment Systems’ released in May last year, aims to push digital transactions to about 15% of the gross domestic product over a two-year horizon. RBI has also proposed to enhance mobile-based and contactless payments and tokenisation, while bringing down pricing and improving security of digital payment systems, and making them more customer-focused.

The latest move to extend digital transaction limits would help increase the breadth and the depth of the digital payment ecosystem in India, according to Vivek Belgavi, partner and fintech leader at PwC India. "...more use cases within the informal and semi-formal sector such as kirana stores, small manufacturing units and neighbourhood shops will emerge with the increase in the transaction limits for contactless card and UPI transactions.”

Chandrakant Salunkhe, president of the SME Development Chamber of India, said at a time when most small and medium businesses are struggling to increase their sales due to the pandemic, extending the limit for digital payments will help them accept payments in a safer and faster manner. "This will especially benefit businesses in smaller cities and areas with intermittent internet connectivity, as they will be able to accept higher payments through point-of-sale offline modes."

Keeping its focus on offline payments for the unserved and underserved segments of the population, the RBI also began testing of two contactless payment products space—eRupaya and PaySe—as part of the first cohort of its regulatory sandbox in November. The other four products selected for testing under the approach also focus on the broader theme of “retail payments”.

“As the ticket size of transactions increase through these digital channels, it will also become easier for fintech startups to acquire a wider range of customers and penetrate into under-banked areas, said Belgavi. "Contactless payments and UPI also come with the advantage of lighter infrastructure and safety (as they ensure social distancing), due to which their adoption rate among customers and businesses is high.”