Digital transactions: RBI increases limit for contactless card transactions to Rs 5,000 from January 1 – The Economic Times

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“In order to expand the adoption of digital payments in a safe and secure manner, it is proposed to enhance, at the discretion of the user, the limits for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from January 1, 2021,” as per Shaktinatha Das’s statement.

To ensure the adoption of digital payments in a safe and secure manner, the RBI governor today announced that the central bank has proposed to increase the limit for contactless card transactions to Rs 5,000 from Rs 2,000 per transaction from January 1, 2021. This announcement was part of the RBI’s bi-monetary policy announcement held on December 4, 2020.

According to the RBI’s Statement on Developmental and Regulatory Policies: Contactless card transactions and e-mandates on cards (and UPI) for recurring transactions have enhanced customer convenience in general while benefitting from increased use of technology. These are also well-suited to make payments in a safe and secure manner, especially during the current pandemic. The recent instructions on disablement of contactless feature on cards and empowering customers to control the limits on their cards have also brought in added safety for users. To further the adoption of digital payments in a safe and secure manner, it is proposed to enhance, at the discretion of the user, the limits for contactless card transactions and e-mandates for recurring transactions through cards (and UPI) from Rs 2,000 to Rs 5,000 from January 1, 2021. Operational instructions will be issued separately.

What it means for customers
This is what industry experts had to say about RBI’s announcement.

Ashwini Kumar Tewari, Managing Director & CEO, SBI Card: “The increase of the limit on contactless card payments from Rs 2,000 to Rs 5000 is a positive and progressive decision by the RBI. This surely will add to the customer convenience, especially, during the prevailing conditions and further boost the digital payments ecosystem in India.”

Dilip Asbe, MD & CEO, NPCI: “The increased limit will help to boost the average value of transaction and push the adoption of digital payments. The announcement will help RuPay cardholders to make secured contactless transactions of up to Rs 5,000 on the go thereby facilitating them with hassle free transaction experience. Similarly, this will be a major boost to the users of recently launched UPI AutoPay functionality for the customers to execute their high ticket recurring payments like utility bills, investments, two-wheeler EMIs, consumer durable EMIs etc. seamlessly. The move will also help customers to on-board into BHIM UPI for performing easy and convenient P2P and P2M transactions.”

Vikas Saraogi, Vice President, Merchant Acceptance, South Asia, Mastercard: “In the last few months, there has been an exponential growth in contactless digital payments. This is because consumers are increasingly choosing to pay in a safe and hygienic way for their day to day needs. Mastercard welcomes the RBI’s decision to increase the limit from Rs 2,000 to Rs 5,000 without entering a PIN on contactless transactions through NFC cards. The company has worked extensively on building awareness about contactless digital payments among merchants and consumers to help people shop quickly, conveniently and safely. The RBI’s decision will further encourage consumers to use digital payments over cash and expedite India’s cash-to-digital journey.”

What is a contactless card?
Contactless cards make use of Near Field Communication (NFC) technology enabling customers to make transactions at payment terminals enabled with the technology without physically swiping the card. As per current regulations, customers need not enter PIN for such transactions if the purchase value is less than Rs 2,000.

According to RBI, “In a Contactless NFC card, the card is read by keeping the card near the card reader. The EMV Chip & PIN cards and Contactless NFC cards are considered to be safer when compared to Magnetic Stripe cards.”

Steps taken to increase security
Back in January 2020, to increase security of card (credit and debit) transactions the Reserve Bank of India had directed all banks to give card users the facility to themselves enable/disable their cards for different types of use–online, physical, contact-less domestically or internationally.

Card issuers were asked to allow card holders to modify transaction limits within the overall card limit for all types of transactions -domestic and international at PoS, ATMs, online transactions and contactless transactions. Click here to read the full story

Today RBI also announced that the RTGS system will soon be made 24×7. “With this enablement, it is proposed to reduce settlement and default risk in the system by facilitating settlement of AePS, IMPS, NETC, NFS, RuPay, UPI transactions on all days of the week.”

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