New Delhi: The Indian government has launched a Rs 1,500 crore incentive scheme to promote small-value UPI transactions. The scheme, approved by the Union Cabinet under Prime Minister Narendra Modi, is aimed at encouraging digital payments among small merchants.
Scheme Duration and Eligibility
This scheme will be active from April 1, 2024, to March 31, 2025. It will apply only to UPI Person-to-Merchant (P2M) transactions where the transaction amount is Rs 2,000 or less. Large merchants will not be eligible for these incentives.
How the Incentives Work
Small merchants will receive an incentive of 0.15 per cent on each eligible transaction. Acquiring banks, which process these transactions, will get 80 per cent of their claim amount each quarter without conditions. However, to receive the remaining 20 per cent, banks must meet two performance benchmarks:
- Maintain a system uptime of over 99.5 per cent (earning 10 per cent of the claim).
- Keep technical failure rates below 0.75 per cent (earning another 10 per cent).
Benefits for Small Merchants and Citizens
No Extra Cost: Small businesses can accept digital payments without worrying about extra charges.
Seamless Transactions: Citizens can make easy and secure digital payments.
Boost to Cashless Economy: Encourages digital payments across India, reducing reliance on cash.
Better Bank Services: Banks must ensure stable and efficient UPI services to qualify for full incentives.
Government’s Vision for Digital Payments
The government wants to expand UPI usage in rural and remote areas. It is focusing on feature phone-based transactions via UPI 123PAY and offline transactions through UPI Lite. The target for the financial year 2024-25 is a total UPI transaction volume of Rs 20,000 crore.
Past Incentives for Digital Payments
To promote digital transactions, the government has been providing incentives since 2020. It removed the Merchant Discount Rate (MDR) on RuPay Debit Cards and BHIM-UPI payments. Over the past three years, it has spent more than Rs 7,000 crore to encourage digital transactions and support banks and payment service providers.
This new scheme continues the government’s commitment to making India a leading digital economy by making transactions easier and accessible to all, especially small businesses.
