Cabinet Approved Incentive Scheme for Promotion of Low-value BHIM-UPI Transactions

Syllabus: GS3/ Economy

In News

• The Union Cabinet, chaired by the Prime Minister has approved an incentive scheme to promote low-value BHIM-UPI transactions (Person-to-Merchant – P2M) for the financial year 2024-25.

Key Highlights

• Incentive Structure:
  • 0.15% per transaction incentive for small merchant transactions up to ₹2,000.
  • Incentive distributed among Acquiring Bank, Issuer Bank, Payment Service Provider Bank, and App Providers.
• Objectives:
  • Promote the indigenous BHIM-UPI platform.
  • Strengthen the indigenous BHIM-UPI platform and boost transaction volumes to ₹20,000 crore in FY 2024-25.
  • Promote feature phone-based UPI 123PAY & offline UPI Lite/LiteX for financial inclusion.
  • Encourage UPI adoption in Tier 3 to Tier 6 cities, especially rural and remote areas.
• Key Benefits:
  • Zero cost UPI services for small merchants.
  • Continues the Merchant Discount Rate (MDR) exemption introduced in 2020 for UPI transactions.
    • MDR is the fee paid by merchants when they accept digital payments.

What is UPI?

• The Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI). It allows users to link multiple bank accounts into a single mobile application, enabling instant money transfers.
• BHIM-UPI is the government-backed UPI application, launched in 2016, designed to promote seamless, fast, and secure digital payments.
• The NPCI International Payments Limited (NIPL), a subsidiary of NPCI, is working to expand UPI & RuPay globally. UPI is now accepted in Singapore, UAE, France, Sri Lanka, Nepal, and other countries.

Source: BS