RBI Nods to SIP Payments Through UPI

RBI Nods to SIP Payments Through UPI

Highlights:

  • RBI approves SIP Payments through UPI.
  • The limit for every e-mandate based recurring transaction without Additional Factor Authentication(such as OTP) is Rs.2,000.
  • The same transaction limit is also applicable to a SIP up to Rs.2,000, registered via UPI.
  • For changing the SIP amount or cancelling the same, an additional factor authentication will be needed.
  • The experts have criticized the limit of Rs.2,000 for SIP registration and said the monetary limit will have to be increased and it should have a faster processing time. 
  • As of December 2019, the mutual fund industry had 2.97 crore active SIP accounts out of India’s population of 135 crores, contributing Rs.8,518 crore.
  • As per the National Payments Corporation of India (NPCI) at present, UPI has around 10 core active users and the numbers will increase to 50 crores in the next 3 years. 

The Reserve Bank of India (RBI) has allowed SIP (Systematic Investment Plan) to be registered via UPI(Unified Payments Interface). In a notification on 10 January 2020, RBI permits the processing of electronic mandate on recurring transactions via UPI. The notification also stated the RBI permission for recurring payments without additional authentication (such as OTP) given to credit cards, debit cards and digital wallets on 21st August 2019 up to Rs.2,000 per transaction. 

Moreover, the same transaction limit is also applicable to a SIP up to Rs.2,000, registered via UPI. However, in the case of changing the SIP amount or cancelling the same, an additional factor authentication will be needed. However, the lump sum investments in mutual funds were already allowed through UPI. 

With a vision to promote digital payments, the central bank has taken this significant step which will result in the rapid growth of retail digital payments in the country. 

In case of mutual funds, the customer will now be able to sign up and pay for products like SIP mutual funds and insurance premiums that involve recurring payments with UPI.    

As of December 2019, the mutual fund industry had 2.97 crore active SIP accounts out of India’s population of 135 crore, contributing Rs.8,518 crore. Well, this implies an average SIP ticket size of Rs.2,861. However, the experts have criticized the limit of Rs.2,000 for SIP registration by saying that the monetary limit will have to be increased and it should have a faster processing time. 

With this initiative, UPI can open the mutual fund market to the customers who do not use Net Banking but are aware of widely known UPI Apps like BHIM and GooglePay. A customer can register multiple SIPs of Rs.2,000 over different days. If National Payments Corporation of India (NPCI) is to be believed, at present UPI has around 10 core active users in its kitty and the number will increase to 50 crore in the next 3 years. 

What’s New:

Under this new facility, the UPI users will be able to bypass Additional Factor Authentication(AFA), required for each payment to a regular merchant. Thus, UPI users can now easily make regular payments by giving one-time instruction to UPI service providers. 

Transaction Limit:   

As per RBI, the limit for every e-mandate based recurring transaction without Additional Factor Authentication(AFA) is Rs.2,000. However, the transactions above this limit  are also subject to AFA. No charge will be applicable on such transactions,where users are availing e-mandate facilities. 

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