RBI Allows NPCI To Revise UPI Limits For P2M Transactions

The Reserve Bank of India (RBI) today allowed the National Payments Corporation of India (NPCI) to revise transaction limits for person-to-merchant (P2M) payments on the Unified Payments Interface (UPI).

The move aims to accommodate higher-value transactions in select merchant categories.

The announcement was made by the RBI governor Sanjay Malhotra during the first monetary policy review of FY26. 

With this change, NPCI will be able to adjust transaction limits for P2M payments, in consultation with banks and other stakeholders. However, person-to-person (P2P) transactions will continue to remain capped at INR 1 lakh.

The move is expected to facilitate higher-value digital payments in sectors like insurance, mutual funds, travel and luxury retail.

“Appropriate safeguards will be put in place to mitigate risks associated with higher limits. Banks shall continue to have the discretion to decide their own internal limits within the limits announced by NPCI,” the governor said.

Currently, UPI transactions for both P2P and P2M are generally capped at INR 1 lakh, with exceptions for specific merchant categories like education and healthcare, where the limits are higher, ranging from INR 2 Lakh to INR 5 Lakh.

“The other two announcements relate to enabling NPCI to decide, in consultation with the banks and other stakeholders, the transaction limits in UPI for person-to-merchant transactions; and making the Regulatory Sandbox theme-neutral and ‘on-tap’,” the governor said in his statement.

In the context of the RBI, a “regulatory sandbox” is a controlled environment where new financial products, services, or business models can be tested with real users under relaxed regulatory conditions

A theme-neutral approach means that the sandbox will no longer be limited to predefined areas, and it will be open to testing any innovative financial product or service within the RBI’s regulatory domain. 

The ‘on-tap’ facility means that fintech companies can apply to participate in the Regulatory Sandbox at any time, rather than during specific cohorts or windows.

On the development, Payments Council of India’s chairman Vishwas Patel said, “RBI’s move to empower NPCI to revise UPI transaction limits for merchant payments is a much needed and welcome reform. It reflects a deep understanding of the changing needs of users and businesses alike.”

UPI Policy And The MDR Debate 

This move comes at a time when the government is deliberating on bringing back the merchant discount rate (MDR) in the payment industry. 

The government withdrew MDR in the FY22 Budget to promote digital payments. Currently, no MDR is levied on UPI and RuPay debit card payments, which the payment industry feels should be reinstated for merchants with an annual turnover exceeding INR 40 Lakh.

Meanwhile, the subsidy, which was given to banks and payment institutions for doing away with the MDR, was also reduced to INR 437 Cr from INR 3,500 Cr previously. 

Despite all these, the UPI transactions recorded an all-time high in total transactions in March to 18.30 Bn from 16.11 Bn in the preceding month.

Other Announcements From MCP Meeting

The announcement comes in addition to the MPC today unanimously deciding to reduce the repo rate by 25 basis points, lowering it to 6% from 6.25% earlier. The repo rate cut is expected to bring the borrowing cost lower, stimulating demand and growth. 

Besides, the RBI has also lowered its growth rate by 20 basis points relative to 6.5% for 2025-26 against the earlier assessment of 6.7% in February, flagging concerns around weakening demand and other problems arising out of the recent Trump tariff impositions. 

“The recent trade tariff-related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation,” Malhotra noted in his speech. 

The market collapsed on Monday with both the Sensex and Nifty 50 plunging over 5% intraday. Following this, the bear took a breather as yesterday, the Sensex and Nifty 50 closed 1.48% and 1.68% higher, respectively. 

Sensex ended today’s market session 0.5% below at 73,847.15 while Nifty 50 was down 0.6% at 22,399.15 at the market closing.