Cabinet approves incentive scheme for low-value BHIM-UPI transactions

The union cabinet on Wednesday approved an incentive scheme for promotion of low-value BHIM-UPI transactions for the financial year 2024-25. The scheme, with an estimated outlay of Rs1,500 crore, will be used to incentivise low-value Person to Merchant (P2M) BHIM-UPI transactions in the financial year 2024-25 (April-March).

The scheme will apply to UPI (P2M) transactions where incentive will be provided at the rate of 0.15 per cent per transaction value of up to Rs2,000 to small merchants.

Government will disburse up to 80 per cent of admitted claims for such incentives by acquiring banks for all the four quarters of financial year without conditions. The remaining 20 per cent of claims will be reimbursed on fulfilment of certain conditions.

To be entitled for 10 per cent of the remaining claim the technical decline of the acquiring bank should be less than 0.75 per cent and for the remaining 10 per cent, the system uptime of the acquiring bank should be greater than 99.5 per cent.

The scheme that will ensure convenient, secure, faster cash flow, and enhanced access to credit for the common citizens and offer seamless payment facilities with no additional charges.

For merchant bankers, this would enable them to provide UPI services at no additional cost. This would also supports the government's vision of a less-cash economy through formal digital transaction.

The government is aiming at a judicious balance of the growth of UPI transactions and the minimum financial burden on the government exchequer.

Promotion of indigenous BHIM-UPI platform is key to government's strategy for financial inclusion and provision of payment options to the common man. The cost of the digital payment services is usually recovered through charging a Merchant Discount Rate (MDR) on beneficiary.