Government Boosts Digital Payments with Rs 1,500 Crore Incentive

In a significant move to promote digital payments among small businesses, the Union Cabinet, under the leadership of Prime Minister Narendra Modi, has approved a Rs 1,500 crore incentive scheme for low-value BHIM-UPI transactions. This initiative, set to run from April 1, 2024, to March 31, 2025, aims to enhance digital adoption by incentivizing person-to-merchant transactions up to Rs 2,000.

Under this scheme, small merchants will benefit from no merchant discount rate (MDR), while banks will receive a 0.15% incentive per transaction. Large merchants, although enjoying zero MDR, will not be eligible for incentives. Transactions exceeding Rs. 2,000 will remain MDR-free but without incentives.

Industry Response and Future Expectations

Despite the government's efforts, industry leaders express concerns over the scheme's funding. Vishwas Patel, joint MD of Infibeam Avenues and chairman of the Payments Council of India, highlights the necessity for higher incentives to support the UPI ecosystem's growth and scalability, suggesting an expectation of over Rs 5,000 crore.

Prime Minister Narendra Modi emphasized the scheme's role in encouraging digital payments and enhancing the 'Ease of Living'. Incentives will be distributed through acquiring banks to issuer banks, payment service providers, and app operators, with a performance-based disbursement model to ensure efficiency and reliability.