Massive Rs 2600 crore incentive scheme approved for BHIM-UPI, RuPay payments; details inside

The Union Cabinet of India approved an incentive scheme for the promotion of RuPay debit cards and low-value BHIM-UPI transactions for a period of one year starting April 2022. The approved scheme has a financial outlay of Rs 2,600 crore, and it aims to promote the use of Point-of-Sale (PoS) and e-commerce transactions using RuPay debit cards and low-value BHIM-UPI transactions (person-to-merchant) during the current financial year.

Finance Minister Nirmala Sitharaman announced the government's intent to continue financial support for digital payments during her 2022-23 budget speech. She emphasized the need to promote payment platforms that are economical and user-friendly. The incentive scheme was formulated in compliance with this budget announcement, and it is expected to give a further boost to digital transactions.

In the previous financial year, the government approved an incentive scheme for digital transactions, which resulted in a 59 per cent year-on-year growth in digital payments transactions, rising from 5,554 crore in FY2020-21 to 8,840 crore in FY2021-22. BHIM-UPI transactions also registered a 106 per cent year-on-year growth, rising from 2,233 crore in FY2020-21 to 4,597 crore in FY2021-22.

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However, there were concerns from various stakeholders in the digital payments systems and the Reserve Bank of India (RBI) about the potential adverse impact of the zero merchant discount rate (MDR) regime on the growth of the digital payments ecosystem. The National Payments Corporation of India (NPCI) requested for incentivization of BHIM-UPI and RuPay debit card transactions to create a cost-effective value proposition for ecosystem stakeholders, increase merchant acceptance footprints and faster migration from cash payments to digital payments.

The incentive scheme aims to facilitate building of a robust digital payment ecosystem and promoting RuPay debit card and BHIM-UPI digital transactions. It also aims to promote UPI Lite and UPI 123PAY as economical and user-friendly digital payments solutions and enable further deepening of digital payments in the country, across all sectors and segments of the population. The government's intent is to achieve "Sabka Saath, Sabka Vikas", or the inclusion of all for the progress of all.