The Union Cabinet on Wednesday approved extending Rs 1,500 crore incentive scheme for small digital transactions, a move aimed to minimise cost of various stakeholders involved in the UPI ecosystem.
The scheme, which covers transactions up to Rs 2,000/- for small Merchants, will be implemented for one year, from April 1, 2024, to March 31, 2025 (post facto). Union Minister Ashwini Vaishnaw later clarified that this scheme will be continued for the next year, too. Under this initiative, small merchants accepting UPI payments will receive an incentive at the rate of 0.15% per transaction.
The government had last week said that the “Incentive Scheme for the promotion of RuPay Debit Cards and low value BHIM-UPI transactions Person to merchant (P2M)” has significantly contributed to the growth of digital payments in the country.
As per the official data, the total digital payment transactions have grown from 8,839 crore in FY 2021-22 to 18,737 crore in FY 2023-24, with a CAGR of 46%, largely driven by UPI, increasing from 4,597 crore transactions in FY 2021-22 to 13,116 crore transactions in FY 2023-24.
How this will work
Zero MDR for all: The scheme ensures that no Merchant Discount Rate (MDR) is charged on UPI transactions, making digital payments cost-effective.
Encouraging digital transactions: Small merchants will receive a 0.15% incentive per transaction for UPI payments under Rs 2,000.
No benefits for large merchants: The incentive applies only to small merchants, ensuring support for local businesses.
The government said that 80% of the admitted claim amount for incentives will be disbursed to banks every quarter without any conditions, to make it quick reimbursement process. The remaining 20% will be paid only if banks maintain high service standards, such as: 10% bonus if the bank’s technical decline rate is below 0.75%; 10% bonus if the bank maintains over 99.5% system uptime.
How this will help the aam aadmi?
The extension of the incentive scheme looks to boost low-value UPI transactions in a country where users are increasingly making digital payments for chewing gum packets to gold.
For customers, this move means seamless, charge-free digital payments at their favorite local stores. Whether buying groceries, tea, or daily essentials, they can continue using UPI without any extra burden.
The incentive of 0.15% per transaction (for transactions up to Rs 2,000) will be provided to small merchants, helping them embrace digital payments without worrying about transaction fees.
