The Reserve Bank of India (RBI) has announced a significant increase in the Unified Payments Interface (UPI) transaction limit for tax payments, raising it from Rs 1 lakh to Rs 5 lakh. This new limit, effective immediately, is designed to simplify and facilitate higher-value tax transactions for consumers.
RBI Governor Shaktikanta Das stated, “Currently, the transaction limit for UPI is Rs 1 lakh except for certain categories of payments that have higher limits. We have decided to enhance the limit for tax payments through UPI to Rs 5 lakh per transaction. This will make it easier for consumers to make tax payments using UPI.”
The change comes as part of a broader review of the UPI transaction limits, which have been periodically adjusted for various types of transactions, including capital markets, IPO subscriptions, loan collections, insurance, medical, and educational services. With the new limit, tax payments, which are often substantial, will benefit from the increased threshold.
In addition to the raised transaction limit, the RBI introduced a new UPI feature called ‘Delegated Payments.’ This feature allows a primary user to authorize a secondary user to perform UPI transactions up to a specified limit from the primary user’s bank account. The secondary user does not need a separate UPI-linked bank account, making digital payments more accessible and convenient.
Governor Das also announced that the repo rate would remain unchanged at 6.5%. This decision follows a rise in inflation, which reached 5.08% in June, surpassing the RBI’s target of 4%. The inflationary pressure, particularly from rising food prices, has complicated the potential for rate cuts. Governor Das emphasized the importance of price stability for sustained economic growth, underscoring the RBI’s focus on controlling inflation.
In addition to the repo rate decision, the RBI revealed measures to enhance the digital lending ecosystem. A new public repository under a regulated entity will ensure accurate credit information, with lenders required to report credit information to Credit Information Companies (CIC) every two weeks for faster borrower updates. Additionally, the cheque clearing cycle will be reduced from two working days to just a few hours, significantly speeding up the process.
The announcement had an immediate impact on the financial markets. India’s bond market experienced a decline, with the 10-year yield rising by 2 basis points to 6.88%. The rupee remained stable, but the benchmark NSE Nifty 50 Index fell by up to 0.7%.
This policy decision comes amidst global market volatility, influenced by recent actions from central banks in advanced economies. The Bank of England recently reduced interest rates, and there is growing pressure on the Federal Reserve to lower rates to support economic growth.