The Union Cabinet has approved a ₹1,500 crore incentive scheme for banks to encourage Unified Payments Interface (UPI) transactions that are under ₹2,000 for the fiscal year 2024–25. With this scheme, banks will earn a 0.15% incentive on transactions made by small merchants, and 20% of the payout will be linked to the performance of the bank’s UPI infrastructure. The aim is to promote digital payment usage, particularly among small businesses, while avoiding any merchant fees.
Key Highlights:
- Incentive for Small Transactions: Banks will earn 0.15% of the transaction value for UPI payments under ₹2,000.
- Infrastructure Performance: 20% of the incentive will depend on the reliability of the bank’s UPI infrastructure.
- No Incentive for Large Transactions: Transactions above ₹2,000 will not be eligible for the incentive.
- Encouraging UPI Expansion: The scheme encourages merchants to accept UPI payments without incurring merchant fees, unlike card payments that attract charges.
- Gradual Reduction in Government Outlay: The government aims to promote UPI growth while managing fiscal expenditure. The target for total transaction volumes in 2024-25 is ₹20,000 crore.
- Previous Year’s Payouts: In FY 2023-24, banks received ₹3,631 crore in incentives, exceeding the total of the previous two years. This included incentives for RuPay debit card transactions.
