The Union Cabinet approved an extension of the ₹1,500 crore incentive scheme for small digital transactions on Wednesday.
This initiative aims to reduce the cost for various stakeholders within the UPI ecosystem and encourage digital payments in the country.
The scheme, which covers transactions up to ₹2,000 for small merchants, will be implemented for one year.
Union Minister Ashwini Vaishnaw however confirmed the scheme’s continuation for the next year.
Under this scheme, small merchants who accept UPI payments will receive an incentive of 0.15% per transaction.
The government has further highlighted that the ‘Incentive Scheme for the Promotion of RuPay Debit Cards and Low-Value BHIM-UPI Transactions (Person to Merchant, P2M)’ has played a significant role in driving the growth of digital payments in India.
Official data reveals that total digital payment transactions grew from 8,839 crore in FY 2021-22 to 18,737 crore in FY 2023-24, with a compound annual growth rate (CAGR) of 46%.
UPI alone saw an increase in transactions from 4,597 crore in FY 2021-22 to 13,116 crore in FY 2023-24.
For consumers, the extended scheme will ensure seamless, charge-free digital payments at local stores for everyday purchases.
The incentive of 0.15% per transaction will help small merchants embrace digital payments without worrying about transaction fees.
How the Scheme Will Work?
To facilitate the scheme’s implementation, the government will however disburse 80% of the admitted claim amount for incentives to banks every quarter without any conditions.
The remaining 20% will be paid only if banks meet high service standards. These include:
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