UPI’s new rule comes into effect from January 1! Know how the transfer limit will increase

Starting January 1, 2025, significant changes are coming to India’s Unified Payments Interface (UPI) system. The Reserve Bank of India (RBI) has announced new rules that will enhance digital payment experiences for users across the country. Here’s what you need to know about these updates.

UPI 123Pay: Empowering Feature Phone Users

UPI 123Pay is a service that allows feature phone users to make digital payments without needing an internet connection. This service uses methods like Interactive Voice Response (IVR), missed calls, and sound-based technology to facilitate transactions.

Increased Transaction Limit

One of the key changes is the increase in the transaction limit for UPI 123Pay. Previously, users could transfer up to ₹5,000 per transaction. Starting January 1, 2025, this limit will double to ₹10,000. This means users can now conduct higher-value transactions without internet access, promoting greater financial inclusion.

Aadhaar-Based Onboarding

To enhance security, the onboarding process for UPI 123Pay will now require Aadhaar-based OTP (One-Time Password) authentication. This step ensures that only authorized users can access and use the service, adding an extra layer of protection to digital transactions.

Standardized Transaction Tagging

A new purpose code, “86,” has been introduced for UPI 123Pay transactions. This code will be used to tag all financial and non-financial transactions, helping in better tracking and reporting. Additionally, initiation modes have been standardized with specific tags:

• IVR-based payments: <Tag name=”TYPE” value=”IVR”/>
• Feature-phone apps: <Tag name=”TYPE” value=”FP”/>
• Missed call-based payments: <Tag name=”TYPE” value=”MCP”/>
• Sound-frequency technology: <Tag name=”TYPE” value=”TONE”/>

These tags will streamline the payment process and improve user experience.

UPI Lite: Enhancing Small-Value Transactions

In addition to changes in UPI 123Pay, the RBI has also updated the rules for UPI Lite, a service designed for quick and easy small-value transactions.

Increased Wallet and Transaction Limits

The wallet limit for UPI Lite has been increased from ₹2,000 to ₹5,000. This means users can store more money in their UPI Lite wallets, reducing the need for frequent top-ups. Additionally, the per-transaction limit has been raised from ₹500 to ₹1,000, allowing for more flexibility in making small-value payments.

Benefits of UPI Lite

UPI Lite offers several advantages:

• Offline Transactions: Users can make payments without an internet connection, ensuring seamless transactions even in areas with poor connectivity.
• Single-Click Payments: Transactions are quick and require minimal steps, enhancing user convenience.
• Uncluttered Passbook: UPI Lite transactions are not recorded in the bank passbook, keeping it free from numerous small entries.

These features make UPI Lite an attractive option for everyday small payments.

Implementation Timeline

While these changes are effective immediately, banks and service providers have until January 1, 2025, to fully implement them. This transition period allows all stakeholders to update their systems and ensure a smooth rollout of the new features.

Impact on Digital Payments in India

The RBI’s decision to increase transaction limits and enhance features for both UPI 123Pay and UPI Lite is a significant step toward promoting digital payments across India.

By making digital transactions more accessible and convenient, especially for feature phone users and those in areas with limited internet connectivity, these changes are expected to drive greater adoption of digital payment methods.

Conclusion

The upcoming changes to UPI services reflect India’s commitment to embracing digital payments and financial inclusion. With increased transaction limits and enhanced security measures, users can look forward to a more seamless and secure digital payment experience starting January 1, 2025.