Bringing cheer to consumers, RBI Governor Shaktikanta Das on December 8 announced an increase in the limit – one, for specific UPI (unified payment interface) transactions, and two, for triggering additional factor authentication for e-mandate for certain recurring payments. In short, the latter implies that customers will no longer need to authenticate these debit transactions via an OTP unless they exceed Rs 1 lakh in value.
The RBI will be issuing a revised circular / instructions for the implementation of these measures.
Pay big medical and educational bills via UPI
Making large payments to hospitals and educational institutions via UPI apps will now become more convenient than before. The RBI has raised the limit for such transactions to Rs 5 lakh from the current Rs 1 lakh per day. “This enhancement will allow individuals to conduct larger transactions using UPI, potentially facilitating smoother and more substantial payments in these crucial sectors,” said Ramesh Narasimhan, CEO, Worldline India, a firm offering payment solutions to businesses.
Currently, excluding a few categories, the UPI transaction limit is capped at Rs 1 lakh per day. Transaction categories such as those relating to the capital market (mutual funds and brokers, for example), collection (credit card payments and loan re-payments) and insurance are capped at Rs 2 lakh per day. The transaction limit for payments for the Retail Direct Scheme which is the RBIs’ government bond-buying platform and for IPO subscriptions is set higher at Rs 5 lakh.
Commenting on the RBI announcement, Harish Prasad, Head of Banking, FIS, India, a fintech firm said, “The increase in the transaction limits for hospitals and educational institutions puts such transactions in the same bracket as financial investments into IPOs which currently qualify for the higher limit.”
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No OTP authentication for transactions of up to Rs 1 lakh
As part of its positive changes for consumers, the RBI Governor also announced an increase in the limit that triggers additional factor of authentication or AFA (that is, approval via an OTP) for e-mandates in certain recurring online transactions.
E-mandates involve instructions to the bank for automatic debits for recurring payments. Currently, if you have an e-mandate based on cards (debit and credit), UPI and prepaid payment instruments or PPIs (such as online wallets), then for every recurring transaction exceeding Rs 15,000 in value, you need to authenticate it via an OTP. That is, every time the payment comes due, the amount gets debited only after you give the go-ahead. This limit has now been raised to Rs 1 lakh for recurring online payments relating to mutual fund subscriptions, insurance premiums and credit card repayments. The Rs 15,000 per transaction limit was introduced in June 2022, prior to which it stood at Rs 5,000.
“The increase in the transaction limit to Rs 1 lakh is destination-based (meant for the three specified transactions) and applies to e-mandates set up through any payment mode,” said Vijay Kuppa, CEO, InCred Money.
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While OTP authentication serves as an important payment security measure, the increased limit frees customers from the hassle of staying alert for any OTPs received for approving recurring payments of up to Rs 1 lakh. The failure to enter the OTP results in the payment not going through and can be a major inconvenience in case of important recurring payments. This can be especially useful when customers are facing phone connectivity issues.
Commenting on the announcement, Tejas Maniar, Chief Digital Officer, Fino Payments Bank says, “This is a progressive move for customers as the increase in limit from Rs 15000 to Rs 1 lakh will remove friction for recurring transactions of up to the higher limit, with known entities such as AMCs, banks and insurance companies.”
Note that, however, today’s announcement does not impact recurring transactions that you set up via a standing instruction with your bank (involves your bank account directly, and not via your card or UPI account linked to it). As a customer, you get intimation when this money gets deducted from your bank account but you are not asked for any OTP authentication. For example, if you have a standing instruction for debiting your bank account for your credit card bill, that goes through automatically without any OTP from you.
Similarly, in the context of mutual fund SIPs (systematic investment plan), nothing has changed for investors where the debit is based on standing instructions to the bank. As Amol Joshi, Founder, PlanRupee and a mutual fund distributor points out, even today once an investor sets up a mutual fund SIP, the amount gets automatically deducted from his bank account on every due date. There is no requirement for any OTP to be entered irrespective of the investment amount.
But in cases where the e-mandate for the SIP is based on say, UPI, investors will benefit from today’s announcement.
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