RBI raises tax payment limit through UPI from Rs 1 lakh to Rs 5 lakh

RBI on Thursday raised the tax payment limit through UPI from Rs 1 lakh to Rs 5 lakh. 

While keeping the repo rate unchanged at 6.5%, governor Shaktikanta Das also announced several key measures to strengthen the digital lending ecosystem, including the creation of a public repository under a regulated entity. 

Accurate credit information is crucial, and lenders are now required to report this to Credit Information Companies (CIC) on a fortnightly basis, benefiting borrowers with faster updates to their credit information. 

Additionally, the clearing cycle for cheques will also be reduced from the current two working days to just a few hours, expediting the process significantly. The central bank has left its benchmark interest rate unchanged for the ninth consecutive policy meeting, as inflation continues to exceed its target. 

Four out of six members of the monetary policy committee voted to maintain the benchmark repurchase rate at 6.5%, a decision anticipated by all. The committee, whose term ends in October, also chose to uphold its relatively hawkish stance of “withdrawal of accommodation.”

Inflation rose to 5.08% in June, significantly above the Reserve Bank of India’s 4% target. The increase in food prices has complicated the timing of potential rate cuts, with Das warning against a premature reduction. 

“Food inflation remains stubborn,” Das said in a live-streamed address from Mumbai. “Without price stability, high growth cannot be sustained. Monetary policy must continue to be disinflationary.”

Following the announcement, India’s bonds fell, with the 10-year yield rising by 2 basis points to 6.88%. The rupee remained unchanged, while the benchmark NSE Nifty 50 Index extended its losses, falling as much as 0.7%.

This decision comes amid significant volatility in global markets, driven by recent central bank actions in advanced economies. Last week, the Bank of England reduced interest rates, and there is mounting pressure on the Federal Reserve to start cutting rates to support the economy.