Mutual Funds: No OTP Needed For UPI Auto Payments Up To Rs 1 Lakh On SIPs, Insurance Prem, Credit Cards

The Reserve Bank of India (RBI) announced on Friday, December 8, an increase in the transaction limits for the Unified Payments Interface (UPI) and e-mandates. The move is expected to facilitate smoother and larger payments in crucial sectors.

In its bi-monthly meeting outcome, the RBI announced a series of measures aimed at fostering digital transactions and streamlining payment processes. One of the major highlights is the increase in the UPI transaction limits, specifically for payments to hospitals and educational institutions. The cap has been raised from the previous Rs 1 lakh to Rs 5 lakh per transaction.

This development comes as a relief for individuals making sizable payments in these sectors, providing them with greater flexibility and convenience. The higher transaction limit is expected to facilitate smoother financial transactions, potentially boosting economic activities in healthcare and education.

The RBI also increased the cap for e-mandates, popularly known as auto-debit, to Rs 1 lakh per transaction. This enhancement allows users to set up recurring payments seamlessly, particularly for transactions related to mutual fund subscriptions, insurance premium payments, and credit card bills.

Previously, one-time password (OTP) based authentication was mandatory for UPI auto payments exceeding Rs 15,000. However, with the recent announcement, the additional factor of authentication (AFA) is no longer obligatory for transactions up to Rs 1 lakh. This decision is expected to simplify the process of setting up and using e-mandates for larger transactions.

"The system has stabilised, but in categories such as subscription to mutual funds, payment of insurance premium, and credit card bill payments, where the transaction sizes are more than Rs 15,000, a need to enhance the limit has been expressed as adoption has been lagging," stated the RBI in a recent statement.

E-mandate, introduced in August 2019, is a digital payment option designed for retail users. It enables seamless recurring payments with the user's authorization, allowing merchants to obtain consent for regular payments. This facilitates auto-debit mandates on credit or debit cards, both domestically and internationally.

As of now, there are 8.5 crore registered e-mandates, processing nearly Rs 2,800 crore of transactions per month. The framework for processing e-mandates was established to strike a balance between the safety and security of digital transactions and customer convenience.

The UPI Automatic Payment feature, known as UPI AutoPay, has gained popularity as it enables users to schedule fixed monthly payments for subscriptions, utility services, and more. With the recent increase in transaction limits for hospitals and educational institutions, users can now make larger transactions, potentially facilitating smoother and more payments in these sectors.

The RBI's decisions in its last bi-monthly meeting indicate an overall positive outlook. While policy rates remain unchanged at 6.5%, the retail inflation projection stands at 5.4% for FY24. The economy's positive outlook is reflected in the upward revision of FY24 GDP growth forecast to 7%.

Notably, the RBI has taken steps to introduce a fintech regulatory framework, aiming to safeguard the interests of borrowers and bring transparency and discipline to the digital lending space. The decision to set up a unified regulatory framework on connected lending for all regulated entities is expected to strengthen credit pricing and management.

Aditya Damani, Founder and CEO of Credit Fair, highlighted the significance of the RBI's decisions, stating, "The stability in lending rates will give more impetus to economic activity in the country, especially in rate-sensitive sectors like affordable housing and MSMEs."

The RBI's recent announcements to increase UPI transaction limits and the cap for e-mandates represent a significant step toward promoting digital transactions and enhancing user convenience. These measures are expected to facilitate smoother payments in critical sectors, spur economic activities, and contribute to the rapid adoption of digital payments in India.