[Analysis] RBI’s Initiatives – UPI Transaction Limit Increase | Digital Lending Apps Repository | Faster Cheque Clearance

The Reserve Bank of India (RBI) has introduced several key initiatives to strengthen India's digital and financial infrastructure. These measures aim to enhance convenience, boost security, and promote inclusivity across digital transactions. This represents significant steps toward a more inclusive and efficient financial ecosystem, reflecting the RBI's ongoing commitment to improving the digital transaction framework in India.

Table of Contents

1. Introduction
2. Increase in Transaction Limit for Tax Payments via UPI to Rs 5 Lakh
3. ‘Delegated Payments’ Facility in UPI to Set Transaction Limits
4. Public Repository for Digital Lending Apps to Combat Unauthorised Players
5. Proposal to Increase Frequency of Reporting Credit Information to CICs
6. RBI Proposes to Expedite Cheque Clearance to a Few Hours

1. Introduction

The Reserve Bank of India (RBI), via Press Release No. 2024-2025/852, dated August 8, 2024, has announced a series of innovative measures designed to enhance the digital and financial ecosystem. These initiatives aim to increase convenience, improve security, and promote inclusivity in digital transactions. Key proposals include:

• Raising the transaction limit for tax payments via UPI from Rs 1 lakh to Rs 5 lakh,
• Introducing a ‘Delegated Payments’ facility via UPI,
• Establishing a public repository for digital lending apps to curb unauthorised players, and
• Accelerating cheque clearance to just a few hours.

The key highlights of these proposals are discussed in detail below.

2. Increase in Transaction Limit for Tax Payments via UPI to Rs 5 Lakh

UPI, known for its seamless features, has emerged as the preferred payment mode. Presently, the UPI transaction limit is capped at Rs 1 lakh. Considering various use cases, the RBI has periodically reviewed and enhanced the limits for certain categories like capital markets, IPO subscriptions, loan collections, insurance, medical, and educational services. Recognising the regular and high-value nature of direct and indirect tax payments, the RBI has decided to raise the limit for tax payments via UPI to Rs 5 lakh per transaction.

3. ‘Delegated Payments’ Facility in UPI to Set Transaction Limits

With a vast user base of 424 million individuals, the potential for UPI’s expansion remains significant. The RBI plans to introduce a ‘Delegated Payments’ feature, allowing a primary user to set a UPI transaction limit for another individual (secondary user) linked to the primary user’s bank account. This feature is anticipated to extend the reach and usage of digital payments nationwide.

4. Public Repository for Digital Lending Apps to Combat Unauthorised Players

On September 2, 2022, the Reserve Bank of India (RBI) issued guidelines addressing various concerns in digital lending, including protecting customers’ interests, data privacy, issues related to interest rates, recovery practices, and the prevalence of mis-selling. Despite these guidelines, media reports have indicated that unauthorised digital lending players continue to operate, falsely claiming affiliations with RBI-regulated entities (REs).

To assist customers in verifying the authenticity of Digital Lending Apps’ (DLAs) claims of association with REs, the RBI plans to establish a public repository of DLAs officially deployed by REs. This repository will be accessible on the RBI’s official website.

Additionally, the repository will compile data submitted directly by the REs without any intervention from the RBI. It will be regularly updated based on reports from the REs, including adding new DLAs or removing existing ones.

5. Proposal to Increase Frequency of Reporting Credit Information to CICs

Currently, credit institutions (CIs) are obligated to report the credit information of their borrowers to credit information companies (CICs) every month or at shorter intervals, as agreed upon mutually by the CI and CIC. To provide a more current snapshot of a borrower’s financial obligations, the RBI has resolved to enhance the frequency of this reporting, shifting from monthly to fortnightly intervals or even more frequently, depending on agreements between the CI and CIC.

Adopting a fortnightly reporting rhythm will ensure that credit reports generated by CICs offer more updated data, which will benefit both borrowers and lenders (CIs).

6. RBI Proposes to Expedite Cheque Clearance to a Few Hours

The current Cheque Truncation System (CTS) completes cheque processing within a cycle of up to 2 working days. To boost the efficiency of cheque clearing, minimise participant settlement risks, and enhance customer experience, the RBI has proposed a shift from the existing batch processing approach to a continuous clearing model with ‘on-realisation-settlement’. Under this proposed system, cheques would be scanned, presented, and cleared within a few hours and continuously during business hours. This would reduce the clearing cycle from the current T+1 days to a few hours.