Govt approves Rs 1,500 crore incentive for promotion of small-value UPI payments

New Delhi: The Government on Wednesday approved a Rs 1,500 crore incentive for the promotion of small-value BHIM-UPI (P2M) transactions up to Rs 2,000, a move aimed at benefiting common people and small merchants.

The 'Incentive Scheme for promotion of low-value BHIM-UPI transactions Person to Merchant (P2M)' for the financial year 2024-25 was approved by the Cabinet chaired by Prime Minister Narendra Modi, Information and Broadcasting Minister Ashwini Vaishnaw told reporters here.

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In a post on social media platform X, the Prime Minister said, "The incentive scheme on promoting low-value UPI transactions, which has been approved by the Cabinet today will encourage digital payments and further 'Ease of Living'''.

The scheme will cover 55 percent of the total merchant transactions, an official release said.

An incentive at the rate of 0.15 percent per transaction value will be provided for transactions up to Rs 2,000 pertaining to the category of small merchants. For all the quarters of the scheme, 80 percent of the admitted claim amount by the acquiring banks will be disbursed without any conditions.

The reimbursement of the remaining 20 percent of the admitted claim amount for each quarter will be contingent upon the fulfilment of certain conditions.

The incentive will enable small merchants to avail of UPI services at no additional cost.

"As small merchants are price-sensitive, incentives would encourage them to accept UPI payment," the release said.

The promotion of digital payments is an integral part of the government's strategy for financial inclusion and provides wide-ranging payment options to the common man.

Vaishnaw also informed that UPI services are also available in Singapore, France, UAE, Sri Lanka, Bhutan, Nepal and Mauritius.

UPI - Unified Payments Interface - is an instant real-time payment system developed by NPCI to facilitate inter-bank transactions through mobile phones.

During the last financial year, incentive payouts by the government for BHIM-UPI were Rs 3,268 crore.

The incentive is paid by the government to the acquiring bank (Merchant's bank) and thereafter shared among other stakeholders: Issuer Bank (Customer's Bank), Payment Service Provider Bank (facilitates onboarding of customers on UPI app / API integrations) and App Providers (TPAPs).

As per the RBI, MDR up to 0.90 percent of transaction value is applicable across all card networks (for Debit cards).

According to NPCI, MDR up to 0.30 percent of transaction value is applicable for UPI P2M transactions. Since January 2020, to promote digital transactions, MDR was made zero for RuPay Debit Cards and BHIM-UPI transactions through amendments in section 10A in the Payments and Settlement Systems Act, 2007 and section 269SU of the Income-tax Act, 1961.

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