The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved an incentive scheme for the promotion of low-value BHIM-UPI transactions with an estimated outlay of Rs 1,500 crore.
(Photo: IANS)
The Union Cabinet, chaired by Prime Minister Narendra Modi, on Wednesday approved an incentive scheme for the promotion of low-value BHIM-UPI transactions with an estimated outlay of Rs 1,500 crore.
Under the scheme, incentives will be provided for UPI transactions up to Rs 2,000, specifically benefitting small merchants. The government aims to increase digital payments penetration while minimising financial burden on merchants and consumers.
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The incentive scheme for the promotion of low-value BHIM-UPI transactions (P2M) will be implemented from April 1, 2024, to March 31, 2025. Only the UPI (P2M) transactions of up to Rs 2,000 for small merchants are covered under the scheme.
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“Incentive at the rate of 0.15% per transaction value will be provided for transactions up to Rs 2,000 pertaining to the category of small merchants,” the statement said.
The key feature of the scheme is the Zero Merchant Discount Rate (MDR) for transactions across all categories, ensuring cost-free digital transactions.
Further, 80% of the admitted claim amount by acquiring banks will be disbursed without conditions each quarter.
The remaining 20% will be released only if banks maintain technical decline below 0.75% and system uptime above 99.5%.
The scheme aims to encourage small merchants to adopt UPI by eliminating additional transaction costs.
It will enhance financial inclusion by increasing UPI adoption, particularly in Tier-3 to Tier-6 cities and rural areas, and improve digital infrastructure by ensuring higher system uptime and efficiency.
With this move, the cabinet aims at the promotion of indigenous BHIM-UPI platform achieving the target of 20,000 crore total transaction volume in FY 2024-25.
It also encourages the penetration of UPI in tier 3 to 6 cities, especially in rural & remote areas by promoting innovative products such as feature phone based (UPI 123PAY) and offline (UPI Lite/UPI LiteX) payment solutions.
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