In News:

The Union Cabinet, chaired by the Prime Minister, approved the Incentive Scheme for Promotion of Low-Value BHIM-UPI Transactions (Person-to-Merchant or P2M) for FY 2024–25 to encourage digital payment adoption, particularly among small merchants and in rural and remote areas.

Key Features of the Scheme:

• Duration: 1 April 2024 to 31 March 2025
• Outlay: ?1,500 crore
• Coverage: UPI (P2M) transactions up to ?2,000 for small merchants only
• Incentive Rate:0.15% per transaction value
• MDR (Merchant Discount Rate):
  • Zero MDR for all UPI P2M transactions
  • Incentive applicable only for small merchants on transactions ≤ ?2,000

Incentive Disbursement Conditions:

• 80% of claim amount: Paid upfront each quarter
• Remaining 20%: Conditional on:
  • 10%: If acquiring bank’s technical decline < 0.75%
  • 10%: If acquiring bank’s system uptime > 99.5%

Objective:

• Promote adoption of indigenous BHIM-UPI platform
• Achieve ?20,000 crore P2M transaction volume in FY 2024–25
• Expand UPI in Tier 3 to Tier 6 cities, especially rural areas
• Promote inclusive tools: UPI 123PAY (for feature phones), UPI Lite/LiteX (offline payments)

Expected Benefits:

• Cost-free UPI usage for small merchants (encouraging cashless transactions)
• Enhanced digital footprint helps merchants access formal credit
• Ensures round-the-clock availability of payment systems
• Strengthens financial inclusion and less-cash economy
• Balanced fiscal support from the government while encouraging systemic efficiency

Digital Payments Background:

• Since January 2020, MDR has been made zero for BHIM-UPI and RuPay Debit Cards via amendments to:
  • Payments and Settlement Systems Act, 2007 (Section 10A)
  • Income-tax Act, 1961 (Section 269SU)
• Previous incentive outlays (in ? crore):

Financial Year           RuPay Debit Card                BHIM-UPI                 Total

2021–22                      432                                       957                         1,389

2022–23                     408                                      1,802                        2,210

2023–24                     363                                      3,268                       3,631

What is BHIM-UPI?

• UPI: Real-time payment system developed by NPCI; allows instant money transfer between bank accounts via mobile apps.
• BHIM-UPI: Government-promoted UPI app launched in 2016.
• NIPL, NPCI’s international arm, is expanding UPI globally. UPI is accepted in Singapore, UAE, France, Sri Lanka, Nepal, and more.