RBI MPC: Guv Sanjay Malhotra Opens Doors For Higher UPI Payment Limits, Encourages Fintech Innovation

The Reserve Bank of India (RBI) has proposed a flexible framework for revising transaction limits on the Unified Payments Interface (UPI). RBI Governor Sanjay Malhotra announced on Wednesday while unveiling the first Monetary Policy decision of the new financial year.

While the central bank also delivered a 25 basis point cut in the repo rate — from 6.25 per cent to 6 per cent — and switched its monetary stance from 'neutral' to 'accommodative', it was the UPI-related changes and fintech push that stole the spotlight.

UPI Transaction Caps May Soon Be Recalibrated

Currently, the cap for UPI transactions stands at Rs 1 lakh for both person-to-person (P2P) and person-to-merchant (P2M) payments, with some exceptions allowing P2M limits of up to Rs 5 lakh. However, this static structure might soon see greater dynamism.

“To enable the ecosystem to respond efficiently to new use cases, it is proposed that NPCI, in consultation with banks and other stakeholders of the UPI ecosystem, may announce and revise such limits based on evolving user needs,” Malhotra said.

He added that banks will retain the authority to impose their own internal thresholds within the outer limits defined by NPCI, ensuring that while innovation is encouraged, risk safeguards are not compromised. However, the Rs 1 lakh cap for P2P transfers will remain unchanged, with the National Payments Corporation of India (NPCI) being duly advised.

Regulatory Sandbox Goes ‘Theme Neutral’ and ‘On Tap’

The RBI also introduced a major change in its approach to fintech innovation oversight. Expanding on its ongoing Regulatory Sandbox (RS) initiative, which has completed four thematic cohorts since 2019, the central bank now plans to accept applications for testing year-round without restricting applicants to pre-defined themes.

“It is now proposed to make the Regulatory Sandbox ‘Theme Neutral’ and ‘On Tap’,” Malhotra announced. The move is aimed at encouraging a continuous pipeline of innovative financial products within RBI’s regulatory scope. The currently open ‘theme neutral’ cohort, launched in October 2023, will remain operational until May 2025.

According to Malhotra, this revised framework is designed to “foster continuous innovation and keep pace with the rapidly evolving FinTech / regulatory landscape.” Further operational details will be announced separately.

Monetary Policy Update: A Shift in Tone

While fintech reforms dominated the headlines, the Monetary Policy Committee’s decision to cut the repo rate by 25 basis points was equally notable. The decision was unanimous and is effective immediately.

Malhotra explained that the policy easing followed “a thorough evaluation of the evolving macroeconomic and financial conditions, as well as output trends.” The move signals the central bank’s intent to support growth while keeping inflationary concerns in check.

As the digital economy becomes an even bigger pillar of India’s financial structure, the RBI's dual push—both monetary and technological—underscores its intent to stay ahead of the curve.

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