Context: Unified Payments Interface (UPI) related frauds have been on the rise. To check the number of transactions and reduce the risk of big financial frauds, leading banks including HDFC Bank, State Bank of India (SBI), Axis Bank, and ICICI Bank have implemented some restrictions on UPI transactions. These come as the National Payments Corporation of India (NPCI) has set guidelines to regulate the expanding digital payment ecosystem.
What is UPI
- UPI is an instant real-time payment system developed by the National Payments Corporation of India (NPCI)
- The mobile-based fast payment system is built over the Immediate Payment Service (IMPS) infrastructure.
- The payments can be made round-the-clock and in real time.
- It eliminates the risk of sharing bank account details by the remitter as customers are not required to enter the details such as Card no, account number, IFSC, etc.
- UPI supports both Person-to-Person (P2P) and Person-to-Merchant (P2M) payments and it also enables a user to send or receive money.
- It enables the use of a single mobile application for accessing different bank accounts.
- Transactions are carried out through mobile devices with two-factor authentication using device binding and a UPI PIN as security.
- Registration of Beneficiary is not required for transferring funds through UPI as the fund would be transferred based on using a Virtual Payment Address (VPA) created by the customer.
Daily limits for UPI
Set by NPCI
- At present, users can make up to 20 transactions or ₹1 lakh in a single day either all at once or through the day. For certain specific categories of transactions such as the capital markets, collections (such as bills, among others), insurance, and forward inward remittances, the limit is ₹2 lakh.
- In December 2021, the limit for the UPI-based ASBA (Application Supported by Blocked Amount) IPO and retail direct schemes was increased to ₹5 lahks for each transaction.
Set by banks and apps
- The transaction limits can vary between banks and may depend on factors such as the type of account, customer profile, and the bank’s risk assessment policies and individual banks have established their own limits for UPI transactions like PNB’s daily limit is ₹50,000, SBI’s daily limit is 1 lakh, etc.
- As for apps, have established their own limits for UPI transactions like Paytm and Amazon Pay UPI have set a daily limit of Rs. 1 lakh, with a total of up to 10 transactions permitted across all UPI apps and bank accounts. However, these limits can vary depending on the banks if you use their UPI application for transactions.
Rationale behind the limits on UPI transactions
- Security and Fraud Prevention: By imposing limits, banks can reduce the potential loss in case of unauthorized transactions or account breaches. Limiting transaction amounts helps to detect suspicious activities and prevent large-scale financial fraud.
- Customer Protection: Transaction limits serve as a safeguard for customers, ensuring that any fraudulent transactions or errors are contained within a manageable threshold.
- Risk Management: Limiting transaction amounts allows banks to monitor and identify unusual patterns or activities more effectively.
- Compliance with Regulatory Guidelines: The transaction limits for different types of transactions, ensuring adherence to regulatory requirements.
Growth of UPI
- Digital transactions: To compare the amount with May of the previous financial year (2022-23), the volume of transactions has grown by 58%, while the overall value has surged by 37%.
- UPI Frauds: However, until February in the financial year 2022-23, the total number of reported UPI frauds had also increased by about 13% in comparison to the previous financial year to 95,402.
- However, this was alongside a decline in the fraud-to-sales ratio at 0.0015%. Thus, to combat the growing incidences, there is an imperative need to have safeguard infrastructure in a growing ecosystem.