Incentive Scheme for Low-Value BHIM-UPI Transactions

March 20, 2025

The Government of India has introduced an incentive scheme to promote low-value BHIM-UPI transactions for the financial year 2024-25. This initiative aims to enhance digital payments, particularly for small merchants. The scheme will run from April 1, 2024, to March 31, 2025, with an estimated budget of ₹1,500 crore.

About the Scheme

The scheme focuses on Person to Merchant (P2M) transactions up to ₹2,000. Small merchants will benefit from zero Merchant Discount Rate (MDR) along with an incentive of 0.15% on each transaction. Large merchants will not receive any incentives. This initiative aims to encourage small merchants to adopt digital payments.

Incentive Structure

For transactions up to ₹2,000, small merchants will receive an incentive of 0.15%. For larger transactions, no incentives are provided. The scheme will disburse 80% of the admitted claim amount to acquiring banks without conditions. The remaining 20% will depend on the banks meeting specific performance criteria.

Performance Criteria

To qualify for the remaining 20% of the incentive, banks must maintain a technical decline rate of less than 0.75% and a system uptime of over 99.5%. This ensures that payment services remain reliable and available.

Benefits of the Scheme

The scheme aims to provide several benefits. It will facilitate faster cash flow for small merchants and enhance their access to credit. Citizens will enjoy seamless payment options without additional charges. The initiative supports the government’s vision of a less-cash economy, promoting digital transactions.

Goals and Objectives

The primary objective is to promote the indigenous BHIM-UPI platform. The government aims to achieve a transaction volume of ₹20,000 crore in FY 2024-25. The scheme also seeks to expand UPI penetration in rural areas by introducing innovative payment solutions.

Historical Context

The promotion of digital payments is important part of India’s financial inclusion strategy. The government has previously eliminated MDR for RuPay Debit Cards and BHIM-UPI transactions to encourage digital adoption. The incentive scheme builds on these efforts to support the payment ecosystem.

Financial Allocations

The government has allocated substantial funds for the incentive scheme over the past three financial years. The payouts for RuPay Debit Cards and BHIM-UPI transactions have shown increase, reflecting the growing importance of digital payments in the economy.

« Previous Post Next Post »