• The ₹1,500 crore incentive scheme will offer 0.15% of the transaction value for UPI payments up to ₹2,000 at small merchant outlets.
  • Banks processing these transactions will receive 80% of their claims quarterly, with the remaining 20% based on performance metrics.

The Union Cabinet, led by Prime Minister Narendra Modi, has sanctioned a ₹1,500 crore incentive scheme to encourage low-value digital payments via BHIM-UPI for the 2024-25 financial year. This initiative aims to strengthen digital transactions among small merchants and enhance financial inclusion.

The scheme applies to UPI payments of up to ₹2,000 at small merchant outlets, offering an incentive of 0.15% of the transaction value. Large merchants will continue to process transactions up to ₹2,000 at zero fees but will not receive incentives.

The initiative is designed to make digital payments more accessible, particularly for businesses in rural and semi-urban regions.

Performance-Based Incentives for Banks

Acquiring banks—responsible for processing transactions on behalf of merchants—will receive 80% of their admitted claims quarterly, with the remaining 20% contingent on performance benchmarks.

These include maintaining a technical decline rate below 0.75% and ensuring an overall system uptime of over 99.5%. This mechanism aims to improve service reliability, minimize transaction failures, and provide seamless payment experiences.

Pushing for a Less-Cash Economy

With a target of achieving ₹20,000 crore in total UPI transaction volume during 2024-25, the government continues to push for a robust digital payment ecosystem.

Expanding services like UPI 123PAY, which enables payments on feature phones, and UPI Lite, which supports offline transactions, are integral to this goal.

Building on Past Efforts

Since 2020, the government has actively promoted digital payments by waiving the Merchant Discount Rate (MDR) for RuPay debit cards and BHIM-UPI transactions.

Over the past three years, it has allocated more than ₹7,000 crore in incentives to support banks, payment service providers, and app operators—ensuring affordable and accessible digital payment solutions for small merchants and consumers alike.

Edited by Harshajit Sarmah