- Date : 19/12/2020
- Read: 3 mins
Two important measures coming out of the RBI’s Monetary Policy Committee will ease retail as well as institutional payments.
The Reserve Bank of India (RBI) is raising the maximum limit for contactless card payments from Rs 2000 to Rs 5000. This will be effective from 1 January 2021. RBI governor Shaktikanta Das made the announcement as a part of the decisions coming out of RBI’s Monetary Policy Committee (MPC). Of course, the decision to make use of the facility up to the maximum limit will be at the discretion of the cardholder.
In case of contactless transactions, cards don’t change hands physically. This makes contactless transactions a more hygienically acceptable form of card payment. Besides, the use of Near Field Communication (NFC) allows a more convenient way of payment. The safety precautions around contactless payments are followed according to the safety protocols specified by the RBI.
The governor also announced that Real Time Gross Settlement (RTGS) will now be available 24x7. It went live on 13 December 2020. People will now be able to transfer funds at any time. RTGS is used to transfer higher value amounts, while National Electronic Funds Transfer (NEFT) is used for smaller amounts. RTGS has no maximum limit, while the minimum transfer that can be made through it is Rs 2 lakh.
Why has the limit on contactless payments been increased?
Earlier this year, the Payment Council of India, along with Visa and Mastercard, had requested the RBI to increase the limit on contactless card payments to Rs 5000. Safety in times of the pandemic was a major reason for this request. Countries around the world are raising the limit in this payment category – some as a temporary measure while others are permanent. This is expected to eradicate the risk while shopping in a post-COVID world. From the United Kingdom (GBP 30 to GBP 45) to Kosovo (Euro 15 to Euro 40), most European nations have raised this limit. The RBI decision can be seen as a step in a similar vein.
How is the safety of contactless payments ensured?
At a technological level, contactless payments are deemed to be safer. Contactless card fraud is only half as likely as regular card fraud. Contactless cards cannot be cloned as easily as magnetic strip cards. It is much more difficult to trigger a contactless card transaction without initiative from the owner, thanks to technological protection and regulatory barriers. Besides, the banks that issue NFC cards protect the cardholders with a 100 percent liability cover. Moreover, the need for a PIN is activated after the minimum number of transactions is made.
Why is RTGS being made available 24x7?
The RBI said that 24x7 RTGS availability is provided to support the global integration of the Indian financial market. It is expected to enable India to develop international financial centres and provide more payment flexibility to Indian enterprises.
What was the earlier timeline for RTGS?
The RTGS system was available only during working days, and only between 7 am and 6 pm. Besides, it was not available on the second and fourth Saturdays in a month. Starting from half-past midnight on 14 December 2020, RTGS was made available round the clock. How digital payment methods are changing the face of the Indian economy