Context: The Union Cabinet has approved the ‘Incentive Scheme for promotion of low-value BHIM-UPI transactions Person to Merchant’ (payments of less than ₹2,000) for FY 2024-25, with an outlay of around ₹1,500 crore.
Relevance of the Topic :Prelims : UPI Incentive Scheme.
Key Highlights of the UPI Incentive Scheme:
- Estimated expenditure of ₹1,500 crore during the financial year 2024-25.
- Incentive Structure:
- Banks will get a 0.15% incentive on UPI transactions of less than ₹2,000.
- 80% of the admitted claim amount will be paid to banks without any restriction every quarter.
- The remaining 20% will depend on achieving certain performance metrics:
- Technical decline rate should be below 0.75%.
- System uptime should be more than 99.5%.
- Target Group: specifically aimed at small traders, who can accept UPI payments at no additional charge. UPI transactions under the scheme remain free of cost for merchants.
Objectives:
- Promotion of indigenous BHIM-UPI platform. Achieving total transaction value of ₹20,000 crore via UPI for FY 2024-25.
- Penetration of UPI in tier 3 to 6 cities, especially in rural & remote areas by promoting innovative products such as: UPI 123PAY & offline (UPI Lite/UPI LiteX) payment solutions.
- Building a robust and secure digital payment infrastructure with minimal technical declines.
Benefits of the Scheme:
- Common citizens will benefit from seamless payment facilities with no additional charges.
- Enable small merchants to avail of UPI services at no additional cost. As small merchants are price-sensitive, incentives would encourage them to accept UPI payment.
- Supports the government's vision of a less-cash economy through formalising and accounting the transaction in digital form.
- Efficiency gain- 20% incentive is contingent upon banks maintaining high system uptime and low technical decline. This will ensure round-the-clock availability of payment services to citizens.
Hence, the scheme is a judicious balance of both the growth of UPI transactions and the minimum financial burden on the Government exchequer.