UPI Payments Above Rs. 1 Lakh: New Merchant Categories Coming Soon

The Reserve Bank of India (RBI) announced plans to revise the Unified Payment Interface (UPI) transaction limits exclusively for payments to merchants (P2M). RBI Governor Sanjay Malhotra mentioned on April 9, 2025, that while the person-to-person (P2P) payment limits will be left unchanged at Rs 1 lakh, payment limits to merchants will be upgraded to support emerging use cases.

Today, UPI transactions for both P2M and P2P are typically limited to Rs 1 lakh. But some merchant categories already have higher limits – insurance premiums have a Rs 2 lakh limit, and IPO applications and income tax payments can be up to Rs 5 lakh. The new announcement empowers the National Payments Corporation of India (NPCI) to set and adjust these limits based on evolving user needs after consulting with banks and other UPI ecosystem stakeholders.

Experts believe this change will significantly benefit international UPI payments. As most foreign currencies are stronger than the Indian Rupee, the current limits are usually insufficient while making payments overseas. The enhanced limits could address this shortfall, making UPI more practical for international transactions in countries where it’s accepted.

Another significant advantage pointed out by payment industry professionals is that large single payments can be made without having to split them. Users will be able to pay school fees, college tuition, hospital bills, and other substantial expenses in one transaction rather than breaking them into multiple payments or switching to alternative payment methods. This enhances convenience while maintaining security through appropriate safeguards.

The higher limits will also be beneficial to merchants in individual industries. The experts expect banks to increase UPI payment limits for businesses in BFSI, education, government services, and banking sectors. The actual rises in limits will be based on the risk segment of an individual merchant – merchants belonging to lower-risk segments will be offered more limits compared to those belonging to higher-risk sections.

In addition to payments within institutions, observers say other expensive purchases, such as car down payments and instant security deposits when receiving healthcare in institutions, among other large-value transactions, will get smoother with the UPI. This is following increasing uses of the UPI in everyday lives and expanding the reach of UPI beyond individual everyday transactions.

Interestingly, despite these moves toward facilitating larger payments, data shows that the average UPI transaction size has actually decreased by approximately 9.66%, from Rs 1,510 to Rs 1,364, over the past year. While overall UPI transactions have grown by 33% year-over-year to 16 billion payments moving Rs 22 trillion in February 2025, the declining average payment size indicates that people are increasingly using UPI for smaller everyday purchases.

The new structure also authorizes NPCI to recognize further categories of merchants that may have use for higher transaction limits as driven by consumer need. Such elasticity enables the UPI system to adapt better to evolving needs and fresh use cases as and when they arise.

Payment industry experts clarify that these revisions are unlikely to reduce any existing transaction limits. The circular explicitly speaks of limit enhancements, so merchants won’t see reductions below the currently mandated general limit of Rs 1 lakh. The changes are designed to expand UPI’s capabilities while maintaining its role as a trusted payment system for transactions of all sizes.