UPI: On Wednesday, the Union Cabinet sanctioned an incentive program aimed at enhancing low-value BHIM-UPI transactions (person to merchant – P2M) for the fiscal year 2024-25, with a projected budget of Rs 1,500 crore.
This initiative will provide incentives for UPI transactions capped at Rs 2,000, primarily benefiting small merchants. The government’s objective is to expand the adoption of digital payments while alleviating the financial strain on both merchants and consumers. This scheme aligns with India’s strategy for the growth of digital payments, which targets a total transaction volume of Rs 20,000 crore by FY 2025. It builds upon earlier government initiatives to promote digital transactions, such as the implementation of zero Merchant Discount Rate (MDR) on RuPay debit cards and BHIM-UPI payments since January 2020.
Aim of the initiative
The program aims to motivate small merchants to embrace UPI by removing additional transaction fees, promote financial inclusion through increased UPI usage, particularly in tier-3 to tier-6 cities and rural regions, and enhance digital infrastructure by improving system uptime and operational efficiency.
Key Features:
– An incentive of 0.15 percent per transaction value for UPI (P2M) transactions up to Rs 2,000 for small merchants.
– A zero Merchant Discount Rate (MDR) applicable to transactions across all categories, ensuring that digital transactions incur no costs.
– Eighty percent of the approved claim amount from acquiring banks will be disbursed quarterly without any conditions.
– The remaining twenty percent will be released only if banks maintain a technical degradation rate below 0.75 percent and a system uptime exceeding 99.5 percent.