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Finance

RBI Monetary Policy: UPI Limit On IPO, Govt Bonds Raised From 2 Lakh To 5 Lakh

RBI Increases Cap On UPI Transactions For IPOs And Government Bonds To Rs 5 Lakh

Highlights:

  • Since its launch, UPI has gained popularity for both retail payments and investment.
  • In a statement, the central bank stated that it has been working to increase retail customer participation in financial markets.
  • According to the RBI governor, Shaktikanta Das, UPI is the largest payment system in terms of volume.

The Reserve Bank of India (RBI) has proposed increasing the transaction limit for payments through the Unified Payments Interface (UPI) for Retail Direct Scheme (RDS) for investment in government securities and Initial Public Offering (IPO) applications from Rs 2 lakh to Rs 5 lakh, according to Governor Shaktikanta Das.

The retail investors who would adopt the seamless UPI payment mechanism will be able to take advantage of this.

The announcement came shortly after the Governor of the RBI presented the results of RBI’s bi-monthly policy review meeting.

“Over time, UPI has become a popular payment option for IPOs since its availability from January 01, 2019. It is reported that IPO applications of Rs 2 to Rs 5 lakh constitute approximately 10 per cent of subscription applications. The transaction limit in the UPI system was enhanced from Rs 1 lakh to Rs 2 lakh in March 2020,” said Das, on Developmental and Regulatory Policies of the RBI.

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He added that the central bank has been working to increase retail customer participation in financial markets, stating the launch of the Retail Direct Scheme for G-sec investments, in which UPI, in addition to other options like online banking, may be utilised to make payments for participation in both primary and secondary markets.

The National Payments Corporation of India (NPCI), a regulated company under the Reserve Bank of India, created UPI as an immediate payment mechanism. UPI is built on the IMPS infrastructure and allows users to transfer money to the bank accounts of any two parties instantly.

Given the scarcity of innovative payment products for feature phones, the RBI considered launching a UPI-based payment product for them. According to the report, the NUUP (National Unified USSD Platform) payment system is already accessible on feature phones and has not yet been adopted.

The RBI stated that India has a large mobile phone consumer market of roughly 118 crore mobile users, of which nearly 73 crore use smartphones, indicating that the country has a sizable number of feature phone users.

The RBI also recommended permitting small-value UPI transactions using an ‘on-device’ wallet in the UPI app, which would save banks’ system resources without affecting the user’s transaction experience. The feature was proposed to make low-value UPI transactions, which form 50% of on the interface, easier.  

According to an RBI statement, “These low value transactions, however, utilise significant system capacity and resources, at times leading to customer inconvenience due to transaction failures because of issues related to connectivity.”

With 14 crore transactions per day, UPI is the country’s single largest retail payment system in terms of transaction volume. According to transaction data research, 50% of UPI transactions were less than Rs 200, confirming the service’s effectiveness.

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Swastika Dubey
Swastika Dubey is a content writer who has a keen interest in politics, fashion, and lifestyle. She is a post-graduate in Economics and loves to listen to classic old Hindi songs and travel to new places in her leisure time. Her writing is well researched, covering important aspects and core of the topic covering crucial points.
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