Govt. boosts digital transactions with incentive scheme | Fusion - WeRIndia

To encourage digital payments among small merchants, the Union Cabinet, led by Prime Minister Narendra Modi, has introduced a ₹1,500-crore incentive program.

This initiative supports low-value BHIM-UPI Person-to-Merchant (P2M) transactions, ensuring they remain cost-free for small businesses.

Under this scheme, all P2M transactions up to ₹2,000 will qualify for an incentive of 0.15% per transaction.

The initiative will be in effect from April 1, 2024, to March 31, 2025, and is expected to extend into FY 2025-26 as well.

Union Minister Ashwini Vaishnaw confirmed the continuation of the scheme, highlighting its role in strengthening India’s digital payment ecosystem.

An official statement emphasized that this initiative aims to support small merchants by making transactions seamless and cost-effective.

To ensure smooth execution, 80% of the approved claims by acquiring banks will be disbursed upfront without additional conditions.

However, the remaining 20% will be subject to specific performance benchmarks:

• 10% of the claim will be released only if the technical failure rate of the acquiring bank is below 0.75%.
• The final 10% will be granted if the bank’s system uptime exceeds 99.5%.

The Reserve Bank of India (RBI) charges a Merchant Discount Rate (MDR) of up to 0.90% on debit card transactions.

Meanwhile, the National Payments Corporation of India (NPCI) limits the MDR to 0.30% for UPI Person-to-Merchant (P2M) transactions, aiming to regulate transaction fees.

Since January 2020, the government has removed Merchant Discount Rate (MDR) charges on RuPay Debit Cards and BHIM-UPI transactions. This decision was made to encourage more digital payments. The aim is to help small businesses adopt digital payment methods.

By eliminating these charges, the government hopes to create a more inclusive, cashless economy. It also aims to promote financial transparency across India.

This program supports the growth of digital transactions and helps make financial services more accessible to everyone, especially small businesses and individuals in rural areas.

Image by Mohamed Hassan from Pxhere (Free for commercial use / CC0 Public Domain)

Image Published on January 28, 2019

Image Reference: https://pxhere.com/en/photo/1570673