The Reserve Bank of India (RBI), in its pursuit of fostering digital payment innovation, has recently announced a significant enhancement in the transaction limits for small value digital payments in offline mode. This strategic move aims to streamline and boost the adoption of digital payment methods across various channels.
1. Background and Reference Circular (CO.DPSS.POLC.No.S1264/02-14-003/2021-2022): The article delves into the RBI’s circular CO.DPSS.POLC.No.S1264/02-14-003/2021-2022 issued on January 03, 2022, establishing the “Framework for Facilitating Small Value Digital Payments in Offline Mode.” This circular laid the foundation for the subsequent developments and adjustments.
2. August 10, 2023 Policy Announcement: The RBI, in its “Statement on Development and Regulatory Policies” dated August 10, 2023, made a notable revelation. It disclosed that the upper limit for offline payment transactions would be increased to ₹500. This significant step is expected to pave the way for more accessible and convenient digital transactions for smaller values, aligning with modern payment trends.
3. Previous Transaction Limits and Rationale for Enhancement: The RBI had initially set a transaction limit of ₹200 per transaction and an overall limit of ₹2000 per payment instrument for small value digital payments in offline mode. These limits applied to various payment methods, including the National Common Mobility Card (NCMC) and UPI Lite. By permitting transactions without the need for two-factor authentication, these modes offered swift, dependable, and contactless payment options. However, demands for higher transaction limits had been mounting.
4. Justification for the Increase: The article explains that the decision to raise the per transaction limit to ₹500 is rooted in the aim to encourage broader adoption of this payment mode. The higher limit is anticipated to accommodate a wider range of use cases and further expedite the transition towards digital payments.
5. Risk Mitigation and Overall Limit: Despite the increase in per transaction limit, the overall limit remains capped at ₹2000. This measure is essential to manage and contain the potential risks associated with relaxing two-factor authentication, ensuring a balance between convenience and security.
6. Immediate Implementation and Regulatory Authority: The directive to enhance transaction limits is issued under Section 10 (2) read with Section 18 of the Payment and Settlement Systems Act, 2007. This move is set to take effect immediately, indicating the RBI’s proactive approach towards driving digital transformation.
7. Conclusion: The Reserve Bank of India’s decision to elevate the transaction limits for small value digital payments in offline mode marks a pivotal stride towards a more seamless and tech-savvy payment ecosystem. This step not only aligns with the evolving payment landscape but also underscores the RBI’s commitment to facilitating secure, efficient, and modern payment methods that cater to the diverse needs of consumers and businesses alike. As these enhanced limits come into play, stakeholders in the payment industry are poised to witness the unfolding of a new chapter in digital finance.
Reserve Bank of India
RBI/2023-24/57
CO.DPSS.POLC.No.S526/02-14-003/2023-24
August 24, 2023
The Chairman / Managing Director / Chief Executive Officer
Authorised Payment System Operators and Participants (Banks and Non-banks)
Madam / Dear Sir,
Enhancing transaction limits for Small Value Digital Payments in Offline Mode
This has reference to the Reserve Bank of India circular CO.DPSS.POLC.No.S1264/02-14-003/2021-2022 dated January 03, 2022 on “Framework for Facilitating Small Value Digital Payments in Offline Mode”.
2. As announced in the Statement on Development and Regulatory Policies dated August 10, 2023, the upper limit of an offline payment transaction is increased to ₹500. Other instructions mentioned in the framework shall continue to remain applicable as before.
3. This directive is issued under Section 10 (2) read with Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007) and shall come into effect immediately.
Yours faithfully,
(Gunveer Singh)
Chief General Manager-in-Charge
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Extract from Statement on Development and Regulatory Policies dated August 10, 2023
Enhancing transactions limits for small value digital payments
A limit of ₹200 per transaction and an overall limit of ₹2000 per payment instrument has been prescribed by the Reserve Bank for small value digital payments in offline mode including for National Common Mobility Card (NCMC) and UPI Lite. By removing the need for two-factor authentication for small value transactions, these channels enable faster, reliable, and contactless mode of payments for everyday small value payments, transit payments etc. Since then, there have been demands for enhancing these limits. To encourage wider adoption of this mode of payments and bring in more use cases into this mode, it is now proposed to increase the per transaction limit to ₹500. The overall limit is, however, retained at ₹2000 to contain the risks associated with relaxation of two-factor authentication. Instructions in this regard will be issued shortly.
