Cabinet Approves ₹1,500 Crore Incentive Program for Low-Value BHIM-UPI Transactions
Click to start listening
Synopsis
The Union Cabinet has approved a ₹1,500 crore incentive scheme for low-value BHIM-UPI transactions, aiming to achieve a ₹20,000 crore transaction volume in FY 2024-25. The initiative focuses on enhancing payment convenience for small merchants and consumers alike.
Key Takeaways
- ₹1,500 crore allocated for low-value BHIM-UPI transactions.
- Target of ₹20,000 crore total transaction volume in FY 2024-25.
- 0.15% incentive for each transaction up to ₹2,000 for small merchants.
- 80% of claims to be disbursed without conditions.
- 20% contingent on banks meeting uptime and decline targets.
New Delhi, March 19 (NationPress) The Union Cabinet, led by Prime Minister Narendra Modi, has given the green light to an incentive program aimed at low-value BHIM-UPI transactions with a projected budget of ₹1,500 crore.
The initiative targets achieving a total transaction volume of ₹20,000 crore in the fiscal year 2024-25 through the homegrown BHIM-UPI platform.
The incentive program, designed to encourage low-value BHIM-UPI transactions (from person to merchant), will be active from 01.04.2024 to 31.03.2025, with a budget of ₹1,500 crore, as per the Cabinet's declaration.
Transactions up to ₹2,000 for small merchants will be eligible for the scheme, as stated by the Cabinet.
The incentive of 0.15 percent will be granted for each transaction value up to ₹2,000 within the small merchant category.
Throughout the program's duration, 80 percent of the approved claim amount by the acquiring banks will be released without any prerequisites, according to the Cabinet note.
The remaining 20 percent of the approved claim for each quarter will depend on specific conditions: 0 percent will be issued only if the technical decline of the acquiring bank is less than 0.75 percent, and the remaining 10 percent will be given only when the acquiring bank's system uptime exceeds 99.5 percent, as informed by the Cabinet.
This policy will promote a more convenient, secure, and rapid cash flow, benefiting the general public with seamless payment options at no extra cost.
Additionally, small merchants will gain access to UPI services free of additional fees. Given that small merchants are sensitive to pricing, these incentives are expected to motivate them to accept UPI payments.
The 20 percent incentive hinges on banks ensuring high system uptime and minimal technical decline, guaranteeing continuous availability of payment services for citizens.
According to the RBI, a merchant discount rate (MDR) of up to 0.90 percent of the transaction value applies across all card networks (for Debit cards).
The NPCI states that an MDR of up to 0.30 percent applies for UPI P2M transactions. Since January 2020, to promote digital transactions, MDR has been waived for RuPay Debit Cards and BHIM-UPI transactions.
