Incentive Scheme: Government’s big announcement regarding UPI, now incentives will be available on small transactions

Incentive Scheme: The Union Cabinet has made a significant decision on UPI. An ‘incentive plan’ was authorized by the government on Wednesday, March 19, with the goal of encouraging BHIM-UPI transactions with minor transactions for the fiscal year 2024-25. Small dealers would profit from this initiative, which is expected to cost Rs 1500 crore.

Small merchants are eligible for a 0.15% bonus on UPI person-to-merchant (P2M) transactions up to Rs 2000, per the guidelines. Large traders, on the other hand, will not get any incentives for these kinds of trades. Small merchants who make transactions up to Rs 2000 would get an incentive payment of 0.15% for each transaction under this arrangement.

According to the government’s official statement, the initiative’s goal is to enable quick, easy, and safe cash movement. Digital transactions will also provide improved access to financing. This will make it possible for regular people to use payment services without incurring any extra fees.

By putting this incentive plan into place, small retailers will be able to use UPI service without paying extra. These incentives will encourage small retailers to accept UPI payments since they are price sensitive.

Every quarter, 80% of the authorized claim amount from the acquiring banks will be paid out unconditionally. The remaining 20% of the authorized claim amount for each quarter, however, will be provided subject to a number of restrictions.

10% of the authorized claim will only be paid out if the acquiring bank’s technical deterioration is less than 0.75%, and the remaining 10% will only be paid out if the acquiring bank’s system uptime exceeds 99.5%.

This scheme’s goal

• in order to advance the domestic BHIM-UPI platform.
• By the fiscal year 2024–2025, the program hopes to have a total UPI transaction value of Rs 20,000 crore.
• The government has been encouraging digital transactions since 2020 by doing away with the Merchant Discount Rate (MDR) on BHIM-UPI and RuPay debit card transactions.
• To promote digital transactions, the government has given banks and payment service providers incentives totaling more than Rs 7,000 crore over the last three years.
• assisting those involved in the payment system in creating a strong and safe digital payment infrastructure.
• With an emphasis on rural and isolated regions, UPI is extending its reach from tier 3 to tier 6 cities by launching cutting-edge products, including feature phone-based (UPI 123PAY) and offline (UPI Lite/UPI LiteX) payment solutions.

Advantages of this plan

• offers enhanced credit access, speedy cash flow, ease, and security via digital footprint.
• offers the public easy ways to make payments at no extra charge.
• enables UPI services to be used by small enterprises without paying extra fees. They may be encouraged to use UPI payments via incentives.
• supports the government’s goal of encouraging a paperless economy by using digital transaction documentation.
• To be eligible for the 20% incentive, banks must maintain minimal technical degradation and high system uptime, ensuring that payment services will always be available to the general public.