The Union Cabinet approved an 'Incentive Scheme' on March 19, aimed at promoting low-value BHIM-UPI transactions for the financial year 2024-25. The scheme, with an estimated outlay of Rs 1,500 crore, will incentivize low-value BHIM-UPI transactions (P2M) to encourage usage among small merchants.
According to the program guidelines, small merchants will be eligible to receive a 0.15% incentive on UPI Person-to-Merchant (P2M) transactions up to Rs 2,000. Conversely, large merchants will not receive any incentives for such transactions.
Under this scheme, an incentive of 0.15% per transaction value will be provided for transactions up to Rs 2,000 for small merchants. This initiative, as stated in an official release by the government, aims to facilitate convenient, secure, and faster cash flow, as well as provide enhanced access to credit through digital transactions. This will benefit common citizens with seamless payment facilities at no additional charges.
The implementation of this incentive scheme will enable small merchants to access UPI services without incurring extra costs. Given that small merchants are price-sensitive, these incentives will encourage them to accept UPI payments.
In each quarter of the program, 80% of the approved claim amount from the acquiring banks will be distributed unconditionally. However, the 20% remaining of the approved claim amount for each quarter is subject to the following conditions:
10% of the approved claim will only be disbursed if the technical decline of the acquiring bank is below 0.75%; and The remaining 10% of the approved claim will only be disbursed if the system uptime of the acquiring bank exceeds 99.5%.
Objective of this scheme
To promote the indigenous BHIM-UPI platform.
The initiative aims to achieve a cumulative UPI transaction value of Rs 20,000 crore by the financial year 2024-25.
Since 2020, the government has been promoting digital transactions by eliminating the Merchant Discount Rate (MDR) on RuPay Debit Cards and BHIM-UPI transactions.
Over the past three years, the government has provided incentives totaling over Rs 7,000 crore to banks and payment service providers to encourage digital transactions.
Support payment system participants in developing a strong and secure digital payments infrastructure.
Expand the reach of UPI in tier 3 to 6 cities, with a focus on rural and remote areas, by introducing innovative products like feature phone-based (UPI 123PAY) and offline (UPI Lite/UPI LiteX) payment solutions.
Benefits of this scheme:
> Offers convenience, security, expedited cash flow, and improved credit access via digital footprint. > Provides seamless payment options for the general public without any extra fees. > Allows small businesses to utilize UPI services without incurring additional expenses. Incentives can motivate them to embrace UPI payments. > Aligns with the government's objective of promoting a cashless economy by documenting transactions in digital format. > Enhances operational efficiency - Banks must maintain high system uptime and low technical decline for a 20% incentive, guaranteeing constant availability of payment services to the public. > Judicious balance of both the growth of UPI transactions and the minimum financial burden on the Government exchequer.