Incentives introduced for low-value UPI transactions to merchants

The Union Cabinet has approved a new scheme to support low-value transactions using the BHIM-UPI system. This decision was made on March 19 and is intended for the financial year 2024-25. The government plans to spend about Rs 1,500 crore to encourage small merchants to use digital payments. Under this scheme, small merchants can earn a 0.15% incentive for each UPI Person-to-Merchant (P2M) transaction, provided the transaction amount does not exceed Rs 2,000. Larger merchants will not qualify for these incentives. The program aims to make cash flow easier and faster for small businesses while also helping citizens make seamless payments without extra costs. To implement this scheme effectively, 80% of the approved claims from banks will be distributed quarterly without conditions. However, the remaining 20% will have specific requirements. For example, 10% will only be given if the technical issues at banks stay below a certain level, and another 10% will require a high uptime of payment systems. The government has been working to promote digital payments since 2020, removing fees on RuPay debit card and BHIM-UPI transactions. So far, over Rs 7,000 crore has been provided in incentives to encourage these digital transactions. The new scheme also aims to expand UPI services to smaller towns and rural areas by introducing additional tools for making payments more accessible, like feature phone options. Overall, this incentive scheme hopes to create a cashless economy and documentation of transactions while making it easier and cheaper for small businesses to use digital payment methods. The goal is to achieve a total transaction value of Rs 20,000 crore by the end of the financial year 2024-25.