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UPI Transaction Rules: Decoding Recent Changes for UPI Users

Recent changes in UPI transaction rules aim to enhance security and streamline user processes, emphasizing stricter authentication measures and providing a clearer framework for seamless digital payments.

  • 3,237 Views | Updated on: Apr 24, 2024

In recent times, the Unified Payments Interface (UPI) has emerged as a game-changer in digital payments, revolutionizing how individuals transact money.

To ensure UPI transactions’ safety, efficiency, and smooth functioning, the National Payments Corporation of India (NPCI) and regulatory authorities have introduced several updates and changes to the UPI transaction rules.

What is a Unified Payment Interface?

The Unified Payment Interface (UPI), crafted by the National Payments Corporation of India (NPCI), is a groundbreaking platform. UPI enables real-time transfers between individual accounts, banks, and merchant accounts via mobile devices. Additionally, it streamlines immediate bank-to-bank payments, enhancing the convenience and ease of online transactions. Undoubtedly, UPI stands out as the most favored payment system in India.

What is a Prepaid Payment Instrument (PPI) in UPI?

Prepaid Payment Instrument (PPI) within UPI encompasses digital wallets, enabling individuals to store funds and conduct real-time online payments. PPIs include wallets, smart cards, preloaded gift cards, vouchers, and magnetized chips.

PPI transactions occur when a wallet, such as PhonePe, is employed to pay by scanning a UPI QR code. Other instances of wallets include Paytm, SODEXO vouchers, Amazon Pay, Freecharge, and more.

New Rules for UPI Users

To keep pace with the evolving financial field, regulatory authorities have introduced new rules and guidelines for all UPI users:

Inactivation of Dormant UPIs

The NPCI has instructed payment applications such as Paytm, Google Pay, PhonePe, and banks to deactivate UPI IDs and associated numbers that have remained inactive for over a year. UPI IDs and their linked mobile numbers, unused for transactions exceeding 12 months, will undergo deactivation. This initiative aims to address dormant accounts and mitigate potential misuse risk.

Enhanced Transaction Thresholds

The National Payments Corporation of India (NPCI) has implemented a revised daily payment cap of ₹1 lakh for UPI transactions. However, the Reserve Bank of India (RBI), as of December 8, raised the transaction limit for educational and healthcare facilities to ₹5 lakhs, surpassing the earlier limit of ₹1 lakh. Regarding interchange fees, a new adjustment was introduced in early 2023. For specific merchant UPI transactions surpassing ₹2,000 and executed through prepaid payment instruments (PPI) such as online wallets, a 1.1% interchange fee will be applicable. It is important for customers to note that they will not encounter additional costs during transactions.

Four-Hour Constraint

To control online payment fraud, reports hint at a potential four-hour window restriction for initial payments exceeding ₹2,000 between unacquainted users. Additionally, UPI users are expected to gain the ability to activate the ‘Tap and Pay’ feature in the near future, although no official announcement has been made yet.

UPI Automated Teller Machines (ATMs)

The RBI is ready to launch UPI ATMs across the country. UPI-ATM is an Interoperable Cardless Cash Withdrawal (ICCW) service that allows participating bank customers who live on UPI to withdraw cash from participating banks’ ATMs (enabled for UPI-ATM) without using their card.

These ATMs will enable users to scan QR codes to withdraw cash from their bank accounts. In November 2023, UPI transactions reached a new peak in value, reaching ₹17.4 trillion, marking a 1.4 percent increase from October 2023’s ₹17.16 trillion. Concurrently, the number of transactions decreased by 1.5 percent to 11.24 billion, compared to the previous month’s record high of 11.41 billion.

Final Thoughts

As UPI continues to evolve and gain widespread acceptance, the recent changes in UPI transaction rules aim to make digital payments more secure, efficient, and user-friendly. UPI users are encouraged to stay informed about these updates to take full advantage of the enhanced features while ensuring a safe and seamless digital payment experience. By embracing these changes, consumers and businesses can contribute to UPI’s continued growth and success as India’s leading digital payment platform.

Key Takeaways

  • To address online payment fraud, there is an anticipated imposition of a four-hour time restriction for the first payment exceeding ₹2,000 between users.
  • NPCI has mandated payment applications and banks to deactivate UPI IDs and associated numbers that have been inactive for over a year.
  • UPI users now have the option to either nominate or explicitly opt out of the nomination process, providing greater flexibility in managing their accounts.
  • Users should know the revised daily payment cap of ₹1 lakh for UPI transactions set by the NPCI.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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