New UPI Rules 2025 – Legal Insights by AMA Legal Solutions

From 1 August 2025, major changes to the Unified Payments Interface (UPI) have come into effect, following directives from the National Payments Corporation of India (NPCI). These changes aim to strengthen digital payment security, enhance user experience, and ensure regulatory compliance for individuals and businesses alike. This guide by AMA Legal Solutions provides in-depth insights into these changes, their legal impact, and compliance strategies you need to adopt immediately.

Key UPI Rule Changes Effective 1 August 2025

1. Revised UPI Transaction Limits

• Peer-to-peer transfer limits increased from ₹1 lakh to ₹1.5 lakh per day.

• High-value payments like loan repayments, mutual fund investments, and insurance premiums are now capped at ₹2 lakh per day.

Legal Impact: Institutions must update compliance systems to align with the revised limits, ensuring no breach of Payment and Settlement Systems Act, 2007 norms.

Explore More: Financial Compliance & Regulatory Advisory

2. Mandatory User Authentication for High-Value Transactions

• Transactions above ₹50,000 now require two-factor authentication (2FA) using biometric or OTP verification.

• All UPI-enabled apps must integrate biometric features by December 2025.

Legal Impact: Non-implementation may result in liability under IT Act 2000 and RBI cybersecurity guidelines.

Explore More: Cybersecurity Compliance Services

3. Auto-Deactivation of Inactive UPI IDs

• UPI IDs inactive for 12 months will be automatically deactivated.

• Users must re-authenticate to regain access.

Legal Impact: This measure enhances fraud prevention and aligns with RBI KYC and AML standards.

Explore More: KYC & AML Compliance Advisory

4. Merchant Discount Rate (MDR) Updates

• Zero MDR continues for small merchants.

• A 0.3% MDR applies to merchants with ₹50 lakh+ annual UPI turnover.

• 0.5% MDR cap introduced for RuPay Credit Card via UPI transactions.

Legal Impact: Businesses must update aggregator agreements and internal accounting to comply, avoiding potential litigation.

Explore More: Commercial Contracts & Business Advisory

5. Fraud Detection & Real-Time Reporting Mandate

• Payment service providers must adopt AI-based fraud detection systems.

• Users can now directly report fraudulent transactions on a centralized NPCI portal.

Legal Impact: Non-compliance could invite actions under Section 43A IT Act and consumer protection claims.

Explore More: Fraud Risk & Litigation Support

Why These Changes Matter

• Strengthens transaction security and boosts consumer confidence.

• Helps curb cybercrime and financial fraud.

• Ensures alignment with RBI & NPCI regulatory frameworks.

Also Read: Arbitration Process in India for Loan Settlement Cases

Legal Advice for Users & Businesses

• Consumers: Keep apps updated, enable biometric authentication, and check for inactive IDs.

• Merchants: Adjust pricing and update agreements to reflect MDR changes.

• Banks & Fintechs: Integrate AI-driven fraud detection and review cybersecurity policies.

Need Help? Contact AMA Legal Solutions for tailored compliance and regulatory advice.

The August 2025 UPI reforms represent a turning point in India’s digital payment landscape. By adopting strict compliance and robust fraud-prevention mechanisms, businesses and individuals can avoid penalties and disputes.

For expert legal guidance on digital payment compliance and financial regulations, reach out to AMA Legal Solutions today.