RBI raises UPI Lite, UPI 123Pay limits at MPC: How it affects your wallet

RBI MPC meeting: The central bank raised the transaction limits for two key UPI services—UPI 123Pay and UPI Lite—offering more convenience for millions of users.

In Short

• RBI doubles UPI 123Pay transaction limit to Rs 10,000.
• UPI Lite wallet limit increased to Rs 5,000 from Rs 2,000
• RBI projects 7.2% GDP growth for FY25, inflation target at 4.5%

The Reserve Bank of India (RBI) announced significant changes to the Unified Payments Interface (UPI) system during its latest Monetary Policy Committee (MPC) meeting. The central bank raised the transaction limits for two key UPI services—UPI 123Pay and UPI Lite—offering more convenience for millions of users.

"UPI has transformed India’s financial landscape by making digital payments accessible and inclusive through continuous innovation and adaptation. To further encourage wider adoption of UPI and make it more inclusive, it has been decided to enhance the per-transaction limit in UPI123Pay from Rs 5,000 to Rs 10,000; and increase the UPI Lite wallet limit from Rs 2,000 to Rs 5,000 and per-transaction limit from Rs 500 to Rs 1,000," said RBI Governor Shaktikanta Das.

The RBI has increased the per-transaction limit for UPI 123Pay from Rs 5,000 to Rs 10,000, doubling the cap for feature phone users. Additionally, the limit for UPI Lite wallets has been raised from Rs 2,000 to Rs 5,000, aimed at simplifying small-value digital transactions for users.

These moves are designed to improve the accessibility and efficiency of digital payments across the country, particularly for those without smartphones or access to high-speed internet.

What is UPI 123Pay?

Launched in March 2022, UPI 123Pay was created by the RBI and the National Payments Corporation of India (NPCI) to help the 400 million feature phone users in India access digital payments. Unlike regular UPI services, which require smartphones and internet access, UPI 123Pay enables users with feature phones to make transactions through simple methods. This innovation supports the government’s goal of financial inclusion by providing digital payment solutions for a larger population.

UPI 123Pay works through four methods:

1. IVR (Interactive Voice Response): Users can call a pre-set number and follow voice prompts in multiple languages to complete a payment.
2. Missed Call Transactions: Users place a missed call to a merchant-specific number. They receive a call back to authenticate the payment using a UPI PIN.
3. App-based Payments for Feature Phones: A simplified UPI app that provides basic functionalities, such as sending and receiving money.
4. Proximity Sound-based Payments: This feature allows users to tap their phone on a merchant device, using sound waves to facilitate contactless payments.

How to Set Up UPI 123Pay

Feature phone users can set up UPI 123Pay by dialing *99#, choosing their bank, and following the instructions to link their account. Users will need their debit card details to create a UPI PIN, after which they can start making secure, internet-free transactions.

UPI Lite

UPI Lite was introduced to make small-value transactions more convenient. With the wallet limit now increased to Rs 5,000, users can store money directly on their devices. This feature eliminates the need to access a bank server for every transaction, speeding up payments for everyday purchases, such as groceries or transport fares. UPI Lite is expected to make frequent small transactions easier, especially in areas with limited internet connectivity.

RBI MPC: Key announcements

In addition to the changes in UPI limits, the RBI's MPC kept the repo rate unchanged at 6.5%. This decision marks the tenth consecutive meeting where rates have been held steady. RBI Governor Shaktikanta Das said that maintaining the current rate provides the flexibility needed to respond to changing economic conditions. He also emphasized the central bank’s goal of keeping inflation within the 4% target, even as inflationary pressures remain due to global factors like rising energy costs.

While the repo rate remains unchanged, the RBI’s monetary stance has shifted to "neutral," indicating that the central bank is balancing inflation control with growth support.

Growth and inflation projections

The RBI also reiterated its GDP growth projection for FY25 at 7.2%, with the following quarterly estimates:

• Q2 FY25: 7%
• Q3 FY25: 7.4%
• Q4 FY25: 7.4%
• Q1 FY26: 7.3%

In terms of inflation, the central bank maintained its target at 4.5% for FY25. However, the MPC acknowledged the risks posed by geopolitical tensions, fluctuating food prices, and rising crude oil costs. The inflation projection for Q2 FY25 is 4.1%, increasing to 4.8% in Q3, before dropping slightly to 4.3% in Q1 FY26.