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Limits on UPI transaction

Context behind the news:

  • As transactions facilitated by the Unified Payments Interface (UPI) breach record highs, banks have opted for daily limits.
  • These are over and above the already imposed ceilings mandated by the facilitator, the National Payments Corporation of India (NPCI), in 2021.

Why limits now?

  • The main objective is to sustain the smoother functioning of the payments interface as it continues to acquire popularity.

What is the conversation about daily limits?

  • At present, users can make up to 20 transactions or ₹1 lakh in a single day either all at once or through the day.
  • For certain specific categories of transactions such as the capital markets, collections (such as bills, among others), insurance and forward inward remittances, the limit is ₹2 lakh.
  • In December 2021, the limit for the UPI­based ASBA (Application Supported by Blocked Amount) IPO and retail direct schemes was increased to ₹5 lakh for each transaction.
  • The conversation now revolves around banks and apps coming up with their own guidelines for transactions.
  • For example, state­run lenders Punjab National Bank (PNB) and Bank of Baroda has set its transaction limit at a much lower ₹25,000. PNB’s daily limit is ₹50,000.

About UPI:

  • UPI full form is Unified Payments Interface.

  • The first major step taken by India to achieve a cashless economy was the introduction of Unified Payment Interface (UPI).

What is UPI Transaction?

  • Unified Payments Interface (UPI)is a payment system that allows users to link more than one bank account in a single smartphone app and make fund transfers without having to provide IFSC code or account number.
  • This is a real-time payment system where funds are credited instantly on a real-time basis.

How Does UPI Work?

  • The user will only have to use a virtual address, known as a Virtual Payment Address (VPA) to carry out any transaction.
  • UPI has been developed by the National Payments Corporation of India (NPCI) and is regulated by the Reserve Bank of India (RBI).

About NPCI (National Payments Corporation of India):

  • National Payments Corporation of India (NPCI)was developed by the Indian Banks’ Association (IBA) and the Reserve Bank of India (RBI).
  • It is an effort to create a robust Payment & Settlement Infrastructure in India under the provisions of the Payment and Settlement Systems Act, 2007.
  • It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013).

Objectives of NPCI:

  • The main objective of NPCI is to provide common people with an affordable and robust payment system.
  • Apart from this, NPCI is also responsible for bringing together and integrating various systems into nationwide uniform and standard business processes that can be used as a retail payment system.

Services Offered by NPCI:

The different services that are offered by the NPCI are mentioned below: 

  • Bharat Bill Payment Interface:
    • Bharat Bill Payment Interface (BBPI) was developed by the NPCI to help the retail payments sector.
    • With the introduction of the BBPI, a single platform has been made for aggregators and bill payers.
  • IMPS:
    • Immediate Payment Service (IMPS) gives you the option to transfer funds immediately.
    • The facility is available at any given time. The beneficiary details must be added to transfer funds via IMPS.
    • You can add the IFSC code and the account number to transfer funds via IMPS.
  • RuPay:
    • NPCI introduced RuPay so that average citizens can make financial decisions.
    • RuPay is an affordable card and can be issued as credit cards, debit cards, and prepaid cards.
    • More than 300 million RuPay cards are in India.
  • USSD Services:
    • Unstructured Supplementary Service Date (USSD) was introduced by the NPCI to allow individuals to make banking solutions without the need for internet or smartphones.
  • BHIM:
    • BHIM uses UPI to complete payment transfers.
    • You can make payments via BHIM by entering the Virtual Payment Address (VPA) or the registered mobile number.
    • No smartphone is required to transfer funds via BHIM.
  • UPI:
    • United Payments Interface (UPI) allows you to transfer funds from your smartphone.
    • However, you will need to link your bank account to complete payments via UPI.
    • Money is transferred directly from one bank to another.

More about ASBA:

  • Application Supported by Blocked Amount (ASBA) is a process used to apply for Initial Public Offerings (IPOs) or Follow-on Public Offerings (FPOs) in India.
  • Under this process, investors’ application money remains in their bank accounts but is temporarily blocked or reserved until the shares are allotted.
    • Once the shares are allotted, the blocked amount is debited from the investor’s account, and the remaining amount is unblocked or released.
  • Investors may submit their ASBA applications to these SCSB (Self Certified Syndicate Banks).

Syllabus: Prelims; Economy

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