In a move that could significantly reshape the digital payments landscape in India, the Reserve Bank of India (RBI) has allowed the National Payments Corporation of India (NPCI) to revise transaction limits for person-to-merchant (P2M) payments on the Unified Payments Interface (UPI) platform.

The announcement was made by RBI Governor Sanjay Malhotra during the first monetary policy review of FY26 held on April 9, 2025. This development is seen as a key enabler for higher-value digital transactions, particularly in sectors like insurance, mutual funds, high-end retail, healthcare, and education.

Existing UPI limits and the new flexibility

Currently, most UPI transactions, whether person-to-person (P2P) or person-to-merchant (P2M), are capped at ₹1 lakh. However, exceptions have been made for specific merchant categories like healthcare and education, where the cap was raised to ₹5 lakh to facilitate larger legitimate payments.

With the new guidelines, NPCI—the organization that operates UPI—has the flexibility to revise these limits after consulting with banks and other stakeholders.

The RBI has stated that appropriate safeguards must be implemented to manage the risks associated with higher-value transactions.

Moreover, while the P2M limit can be increased, P2P transactions will continue to be restricted to ₹1 lakh, ensuring a balanced risk framework.

Why this matters for India’s digital economy

The move signals RBI’s intent to strengthen UPI as a primary mode of digital payments in India. By enabling high-ticket transactions, sectors like:

• Insurance (premium payments)

• Mutual Funds (investment transfers)

• Travel (luxury bookings)

• High-end Retail (premium purchases)

can now leverage UPI more efficiently. These segments previously relied on credit cards, net banking, or NEFT/RTGS for such payments.

This change could shift a significant volume of high-value transactions to UPI, increasing speed, convenience, and interoperability.

NPCI’s role and banking discretion

The NPCI will be at the forefront of revising the new transaction limits. However, banks will continue to have discretion over how much of the NPCI-announced limit they want to implement for their customers.

This layered control mechanism ensures that banks can manage internal risk thresholds, even as national limits expand.

For example: If NPCI sets the P2M limit at ₹5 lakh across all sectors, a bank may choose to cap it at ₹3 lakh for its users based on its own risk assessments and infrastructure capabilities.

Safeguards and risk mitigation

The RBI emphasized the need for appropriate safeguards. This could include:

• Stricter authentication protocols for high-value transactions

• Fraud detection algorithms for real-time monitoring

• Customer communication and transaction alerts to ensure transparency

These steps will be crucial to protect users and merchants alike as UPI expands to handle bigger sums.

UPI’s evolution and continued dominance

UPI has become India’s most dominant digital payment platform, clocking over 13 billion transactions in March 2025 alone. With a compound annual growth rate of over 50% since 2016, it has outpaced all other payment systems in terms of:

• Speed

• Ease of use

• Merchant integration

By increasing the P2M transaction limit, RBI is betting big on UPI’s scalability and infrastructure.

This will further reduce reliance on cash and plastic money, especially for big-ticket merchant payments.

Industries set to benefit the most

This revision is expected to immediately benefit the following sectors:

1. Insurance

UPI can now be used for annual premium payments and policy purchases, which often exceed ₹1 lakh.

2. Mutual Funds

Investors will be able to invest larger lump sums into SIP accounts and mutual fund schemes via UPI, replacing NEFT and IMPS.

3. Travel and Tourism

High-end vacation packages, flight bookings, and hotel stays can now be settled using UPI with ease.

4. Healthcare

Premium services at multi-specialty hospitals, surgical procedures, or treatment packages that cost over ₹1 lakh will now fit under UPI’s umbrella.

5. Education

Fees for private institutions, coaching centers, and international courses often cross ₹1 lakh. UPI's limit raise makes it a viable option.

Encouragement for financial inclusion

The broader impact of this policy change lies in its contribution toward financial inclusion. UPI has already transformed payments for:

• Small merchants

• First-time digital users

• Tier II and Tier III cities

By enabling higher-value transactions, this move opens up UPI to the upper-middle class and HNIs (High Net-worth Individuals), thus democratizing digital finance across income levels.

Final word from the RBI

The RBI’s forward-looking approach ensures that technological innovation does not outpace safety and stability. In its policy review, the RBI maintained that:

"Banks shall continue to have the discretion to decide their own internal limits within the limits announced by NPCI."

This ensures a controlled and phased rollout, allowing technical readiness and cybersecurity frameworks to adapt accordingly.

Conclusion

The decision to allow NPCI to revise UPI transaction limits for P2M payments is a strategic step towards creating a more robust, scalable, and inclusive digital payments ecosystem.

By retaining the ₹1 lakh P2P cap and selectively increasing P2M limits, the RBI has achieved a fine balance between innovation and security.

As more sectors come under the high-value UPI bracket, India moves closer to realizing its vision of becoming a cashless economy powered by real-time digital transactions.

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