Government Rolls Out ₹1,500 Crore Boost for UPI Transactions – Key Details Here

The Union Cabinet, led by Prime Minister Narendra Modi, has recently greenlit the “Incentive Scheme for Promoting BHIM-UPI Transactions.” This initiative is designed to encourage small shopkeepers (P2M merchants) to adopt digital payments by offering them financial incentives for accepting payments through the Unified Payments Interface (UPI).

The scheme, which will be operational during the financial year 2024-25, involves a government expenditure of approximately ₹1,500 crore. The primary goal is to accelerate the adoption of digital transactions and economically empower small-scale merchants across the country.

Key Features of the Scheme:

• Applicable to Small Transactions: The incentive scheme will cover UPI-based merchant transactions (P2M) of up to ₹2,000.
• Incentive for Shopkeepers: Small shopkeepers will receive an incentive of 0.15% on each transaction (capped at ₹2,000). For instance, if a customer pays ₹1,000 via UPI, the merchant will earn an incentive of ₹1.5.

Banks to Benefit Too: Banks will also be incentivized under the scheme. The government will disburse 80% of the claim amount to banks immediately, while the remaining 20% will be released based on the bank’s performance. To qualify for the full payout, banks must maintain a technical fault rate of less than 0.75% and ensure system uptime of over 99.5%.

Benefits for Merchants and Customers:

• Seamless Payments: The scheme ensures that UPI payments are easy, secure, and fast for both merchants and customers.
• No Additional Costs: UPI services will remain free of charge, and no extra fees will be levied on transactions.
• Improved Access to Credit: A digital record of transactions will help merchants build a financial history, making it easier for them to secure loans in the future.
• Convenience for Customers: Customers will enjoy hassle-free payments without incurring additional charges.

Broader Objectives:

• The government aims to facilitate ₹20,000 crore worth of UPI transactions during the financial year 2024-25. The scheme also focuses on:
• Supporting stakeholders who maintain the payment ecosystem.
• Expanding UPI’s reach to smaller towns and rural areas.
• Ensuring operational efficiency and minimizing system delays.

This initiative aligns with the government’s broader push to promote digital payments. Earlier, the Merchant Discount Rate (MDR) on RuPay debit card and BHIM-UPI transactions was reduced to zero, further encouraging the adoption of digital payment methods.

By incentivizing small merchants and ensuring a robust payment infrastructure, the government aims to create a more inclusive and digitally empowered economy.