Govt Approves ₹1,500 Crore Scheme to Boost UPI Payments for Small Merchants
The Union Cabinet, led by Prime Minister Narendra Modi, has approved a ₹1,500 crore incentive scheme to promote BHIM-UPI digital payments for small merchants. This initiative encourages them to accept UPI payments without extra charges.
Key Features of the Scheme:
- Incentive: 0.15% of each transaction amount.
- No Merchant Discount Rate (MDR): Merchants won’t have to pay any charges.
- Who Benefits? Small merchants accepting UPI payments for transactions up to ₹2,000.
UPI and MDR Rules:
- UPI transactions: No MDR charges for small merchants.
- Card payments: Debit card MDR is capped at 0.90% across networks, while UPI P2M transactions have a 0.30% MDR limit set by NPCI.
- Past policy: Since January 2020, MDR for RuPay debit cards and BHIM-UPI was made zero by updating payment laws.
Implementation & Future Plans:
- Start Date: April 1, 2024
- End Date: March 31, 2025
- Extension: Planned for FY 2025-26 as well.
How the Incentive is Given:
- 80% of the incentive will be directly given to banks.
- The remaining 20% depends on:
- 10% if the bank’s transaction failure rate is below 0.75%.
- 10% if the bank’s system uptime is above 99.5%.
Push for a Digital Economy:
This move is expected to accelerate India’s shift towards a cashless economy, making digital payments easier and more affordable for small businesses.
