The number of Unified Payment Interface (UPI) transactions is continuously increasing in the country, leading to a rise in money transactions. People are extensively using UPI for financial transactions. However, in some parts of the country, UPI is still not widely used.

To address this, the government wants those who are not currently using UPI to take advantage of this facility as well. In this regard, the Union Cabinet made a significant decision on Wednesday. The Cabinet approved the ‘Incentive Scheme’ to promote low-value BHIM-UPI transactions for the financial year 2024-25.

Union Minister Ashwini Vaishnav, in a press conference following the cabinet meeting, announced that the government has approved Rs 1,500 crore to promote the incentive scheme aimed at encouraging low-value BHIM-UPI transactions (P2P).

Government to Bear Merchant Discount Rate (MDR) Expenses

The government announced in an official release that it will bear the MDR (Merchant Discount Rate) for payments under Rs 2,000 made to small traders. Incentives will be provided at the rate of 0.15% on each transaction value for transactions up to Rs 2,000 by small traders.

Incentives for UPI Payments

This initiative aims to ensure convenient, secure, and fast cash flow, along with better credit access through digital footprints. Citizens will benefit from seamless payment facilities without any additional charges. Small merchants, being sensitive to costs, will be encouraged to accept UPI payments as they can avail of the service without additional expenses.

Banks to Maintain High System Uptime

Approximately 20% of the incentive is linked to banks maintaining high system uptime and minimizing technical issues. This ensures 24/7 availability of payment services to citizens. The government aims to strike a balance between increasing UPI transactions and minimizing financial strain on the exchequer.