Incentive Scheme for Promoting UPI Transactions

Why in News?

• The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the Incentive Scheme for Promoting Low Value BHIM-UPI Transactions from Person to Merchant (P2M) for the financial year 2024-25.
•  Incentive scheme will be implemented to promote low value BHIM-UPI transactions (P2M).
• The scheme covers UPI (P2M) transactions up to Rs. 2,000 for small merchants only.

Incentives under the scheme:

• Small merchants will get an incentive of 0.15% on transactions up to ₹2,000.
• 80% of the claims will be distributed unconditionally to the acquiring banks.
• The remaining 20% ​​will be given on the following conditions:
  • 10% incentive only if technical degradation is less than 0.75%.
  • 10% incentive only if system uptime is more than 99.5%.

Benefits of the scheme

• Boost digital payments – Incentive for small merchants to accept UPI payments.
• Faster cash flow – Digital payments will ensure instant payment to merchants.
• Benefits to common citizens – Facility of digital payments without any additional charges.
• Less cash economy – Formalization of digital transactions will increase transparency.
• Secure and seamless service – Incentive for banks to maintain high system uptime and low technical degradation.

Objectives of the scheme

• To promote indigenous BHIM-UPI platform.
• Target of total transactions of ₹20,000 crore in FY 2024-25.
• To make digital payment infrastructure robust and secure.
• To increase UPI reach in rural and remote areas.
• To maintain high system uptime and reduce technical degradation.

Background and Government strategy

• Promoting digital payments is a key part of financial inclusion.
• MDR charges on BHIM-UPI and RuPay Debit Cards made zero from January 2020.
• MDR of up to 0.30% was applicable on UPI P2M transactions, which is being borne by the Government.