A one-year incentive program for the promotion of RuPay debit cards and low-value BHIM-UPI transactions was approved by the Union Cabinet of India in April 2022.
The approved plan aims to encourage Point-of-Sale (PoS) and e-commerce transactions with RuPay debit cards, as well as low-value BHIM-UPI (person-to-merchant) transactions, during the current fiscal year. It has a cost of Rs 2,600 crore.
During her speech about the budget for the years 2022 and 2023, Finance Minister Nirmala Sitharaman made the announcement that the government intends to maintain its financial support for digital payments.
She emphasized the significance of promoting cost-effective and user-friendly payment platforms. The incentive program was created in accordance with the budget’s announcement, and it is anticipated to boost digital transactions further.
An incentive program for digital transactions was approved by the government in the previous fiscal year. This led to a 59% increase in digital payments transactions year-over-year, rising from 5,554 crore in FY2020-21 to 8,840 crore in FY2021-22.
Additionally, BHIM-UPI transactions increased by 106% year-over-year, reaching 4,597 crore in FY2021-22 from 2,233 crore in FY2020-21.
However, the Reserve Bank of India (RBI) and a number of digital payment system stakeholders were concerned about the potential negative effects of the zero merchant discount rate (MDR) regime on the expansion of the digital payments ecosystem.
The National Payments Corporation of India (NPCI) requested that BHIM-UPI and RuPay debit card transactions be incentivized in order to create a value proposition that is cost-effective for stakeholders in the ecosystem, expand merchant acceptance footprints, and speed up the transition from cash payments to digital payments.
The incentive program aims to promote BHIM-UPI digital transactions and the development of a robust digital payment ecosystem. It also aims to make UPI Lite and UPI 123PAY more widely available as cost-effective and user-friendly digital payment options and to facilitate the country’s continued expansion of digital payment services to all sectors and populations. “Sabka Saath, Sabka Vikas,” or the inclusion of all for the advancement of all, is the government’s goal.
