The Reserve Bank of India (RBI) on Thursday increased the transaction limit for offline small-value digital payments from Rs 200 to Rs 500. This decision, announced during the RBI's bi-monthly policy review, has been implemented under Section 10(2) and Section 18 of the Payment and Settlement Systems Act, 2007 (Act 51 of 2007).

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The updated policy, effective immediately, allows for higher-value transactions without the need for two-factor authentication, RBI said.

This means customers using small value digital payments in offline mode will now be able to pay up to Rs 500. Notably, offline digital payment means transaction that does not require internet or telecom connectivity. Small value digital payments in offline mode can be done using the National Common Mobility Card (NCMC) and UPI Lite.

The policy change, which was proposed by the RBI in its monetary policy committee address on August 10, seeks to strike a balance between convenience and security. While the per transaction limit has been raised to Rs 500, the overall limit has been retained at Rs 2,000. This precautionary measure aims to mitigate the potential risks associated with the relaxation of two-factor authentication.

The decision to increase the transaction limit was driven by the realization that several transactions, such as restaurant bills and ride-hailing payments, often exceed the previous Rs 200 limit. This limitation inadvertently hindered the wider and more frequent use of digital payment platforms. By raising the limit, the RBI aims to encourage a broader range of daily transactions and enable users to adopt digital payments for their convenience.

Experts expressed positivity towards the RBI's decision. They said that this step would accommodate a wider variety of daily transactions and promote the adoption of digital payments among users. The central bank's move to streamline small-value transactions by eliminating the need for two-factor authentication is expected to provide a faster, more reliable, and contactless mode of payment for everyday transactions like small-value payments and transit payments.

First Published:Aug 24, 2023 2:07 PM IST