The Union Cabinet has approved a Rs 15 billion scheme to promote low-value BHIM-UPI peer-to-merchant (P2M) transactions for FY 2024-25. The initiative aims to drive digital payments and achieve a target of 200 billion transactions in the fiscal year. 

For the first time, the government has defined small and large merchants for BHIM-UPI incentives. Transactions up to Rs 2,000 made to small merchants will receive an incentive at a rate of 0.15%, while large merchants in the same bracket will receive no incentive. No incentives will be provided for transactions exceeding Rs 2,000. 

Prime Minister Narendra Modi called the scheme a step towards enhancing digital payments and ‘Ease of Living’. However, industry players have raised concerns over the funding allocation. Vishwas Patel, Joint MD of Infibeam Avenues and Chairman of the Payments Council of India (PCI), argued that the Rs 15 billion allocation would be insufficient to sustain the ecosystem, which processed Rs 246.82 trillion in UPI transactions in 2024. He suggested introducing a controlled MDR (Merchant Discount Rate) of 25 bps for merchants with over Rs 4 million turnover, while maintaining zero MDR for smaller merchants. 

In FY24, the government provided Rs 32.68 billion in incentives for BHIM-UPI, compared to Rs 18.02 billion in FY23 and Rs 9.57 billion in FY22. Additional Rs 4.08 billion and Rs 4.32 billion were allocated for promoting RuPay debit cards in previous years. 

The government has set conditions for the disbursement of funds, ensuring that 80% of admitted claims by acquiring banks will be disbursed unconditionally, while the remaining 20% will be linked to factors such as maintaining technical declines below 0.75% and a system uptime of over 99.5%. 

(Business Standard)