The Union Cabinet chaired by PM Modi today approved the ‘Incentive Scheme for promotion of low-value BHIM-UPI transactions Person to Merchant (P2M)’ for the financial year 2024-25. According to the scheme, The incentives will be applicable to low-value BHIM-UPI transactions below Rs 2000. The incentive scheme for promotion of low-value BHIM-UPI transactions (P2M) will be implemented at an estimated outlay of 1,500 crore.
What Exactly Is The Scheme
Under the scheme, incentives will be provided for UPI transactions up to ₹2,000, specifically benefitting small merchants. The government aims to increase digital payments penetration while minimising financial burden on merchants and consumers. Acquiring banks will automatically receive 80% of the approved claim amount every quarter, without any specific conditions or additional requirements.
Key Features
- Merchants will receive a 0.15% incentive on every UPI (P2M) transaction up to ₹2,000, encouraging more digital payments
- Zero Merchant Discount Rate (MDR) on any category of transactions, making digital payments cost-free for businesses
Scheme Aims
The government is stepping up its push for digital payments with a new scheme aiming to drive ₹20,000 crore in transactions during FY25. This move is part of India’s broader strategy to make digital payments more accessible and widely used. It also builds on past efforts, like scrapping merchant fees (MDR) on RuPay debit cards and BHIM-UPI payments since January 2020, making cashless transactions easier and more affordable for everyone.
Objectives and benefits
- Boost for Small Businesses: The scheme aims to ease financial burdens on small merchants and promote cashless transactions
- Encouraging UPI Growth: With incentives in place, more businesses may shift towards digital payments, enhancing convenience for both merchants and customers
- This initiative focuses on expanding UPI adoption in smaller towns and rural areas, making cashless transactions accessible to more people
- Supporting the government’s vision of a less-cash economy, this initiative promotes transparency and better financial management
Over the past three years, the Indian government has steadily increased its support for digital payments, raising incentive payouts from ₹1,389 crore in FY 2021-22 to ₹3,631 crore in FY 2023-24. These funds are given to acquiring banks, which then distribute them to key players like issuer banks, payment service providers, and app developers.
With the Cabinet’s latest approval, the government is doubling down on its commitment to making digital transactions smoother, more accessible, and a key part of India’s growing fintech ecosystem.
