India approves incentives for low-value UPI transactions

The Union Cabinet has approved a new scheme to encourage low-value transactions through the BHIM-UPI system. The decision was made on March 19, 2025, with a focus on supporting small merchants. The incentive will be set at 0.15% for each transaction up to Rs 2,000. The government plans to invest about Rs 1,500 crore in this initiative for the financial year 2024-25, as announced by Union Minister Ashwini Vaishnaw. Under this scheme, banks will receive payment for 80% of the approved amount without any conditions. The remaining 20% will depend on two key requirements: the technical decline of banks must be less than 0.75%, and the banks must maintain a system uptime of over 99.5%. This initiative aims to provide easier, secure, and quicker payment options for everyday citizens. It will also help small merchants use UPI services without incurring extra costs. Encouraging the use of digital payments aligns with the government's goal of reducing cash transactions. The scheme is designed to ensure that people have reliable access to payment services while also supporting the growth of digital transactions in the economy.