UPI: The Modi administration at the national level has introduced significant relief for small transactions. On Wednesday, the Union Cabinet approved an incentive program amounting to approximately Rs 1,500 crore aimed at encouraging UPI transactions valued under Rs 2,000 for the financial year 2024-25.
Government will cover the Merchant Discount Rate (MDR)
Through this initiative, the government will cover the Merchant Discount Rate (MDR) costs for payments below Rs 2,000 made by individuals to merchants, particularly benefiting small business owners. The government’s objective is to enhance the adoption of digital payments while alleviating the financial strain on both merchants and consumers.
Know the exact decision
In its announcement, the Union Cabinet stated, “On Wednesday, we approved the ‘Person to Merchant (P2M) Incentive Scheme for Promoting Low Value BHIM-UPI Transactions’ for the financial year 2024-25.” This scheme, designed to promote low-value BHIM-UPI transactions, will be executed at an estimated cost of Rs 1,500 crore, specifically targeting UPI transactions up to Rs 2,000 for small merchants. The statement further noted, “Incentives will be provided at a rate of 0.15 percent per transaction for transactions up to Rs 2,000 pertaining to small merchants.”
Prior to the pandemic, MDR was applicable to UPI transactions under Rs 2,000, but it was suspended in 2020 to encourage UPI usage. It is important to clarify that the Merchant Discount Rate, or MDR, is a fee typically paid by merchants to banks for processing online payments, indicating that this new government decision is aimed at individuals operating their own shops or businesses.