Cabinet clears incentive scheme to promote RuPay Debit Cards, low-value BHIM-UPI transactions

New Delhi, Jan 11: Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the incentive scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (person-to-merchant) for a period of one year from April 2022.

With a focus on promoting the use of payment platforms that are economical and user-friendly, Finance Minister Nirmala Sitharaman in her speech on the Budget for FY2022-23 announced the Centre's aims to continue the financial support for digital payments announced in the previous Budget.

The incentive scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (P2M) in FY 2022-23 has received approval with a financial outlay of ₹ 2,600 crore. Under this scheme, acquiring banks will be provided financial incentives, for promoting Point-of-Sale (PoS) and e-commerce transactions using RuPay Debit Cards and low-value BHIM-UPI transactions (P2M) for the current financial year FY 2022-23.

The scheme will also promote UPI Lite and UPI 123PAY as economical and user-friendly digital payment solutions and enable further deepening of digital payments in the country, across all sectors and segments of the population.

A Sustained Progress in Digital Transactions

Earlier in FY2021-22, the Centre had approved an incentive scheme in compliance with the budget announcement of FY2021-22 to boost digital transactions further.

Showing sustained progress, the total digital payments transactions have registered a year-on-year growth of 59%, rising from 5,554 crores in FY2020-21 to 8,840 crore in FY2021-22. In addition to this, BHIM-UPI transactions have also recorded a year-on-year growth of 106%, rising from 2,233 crore in FY2020-21 to 4,597 crore in FY2021-22.

At the peak of the COVID Pandemic when the nation was under lockdown and social distancing was the new norm, digital payments facilitated the functioning of businesses, including small merchants. It benefitted customers by limiting physical transactions and the ease of purchase with the due practice of social distancing.

Last year in December, UPI achieved a record of 782.9 crore digital payment transactions with a value of ₹ 12.82 lakh crore.

It has been observed that various stakeholders in the digital payments systems and the Reserve Bank of India (RBI) have expressed concerns regarding the potential adverse impact of the zero MDR (Merchant Discount Rate) regime on the growth of the digital payments ecosystem.

Among its many suggestions, the National Payments Corporation of India (NPCI) requested for incentivisation of BHIM-UPI and RuPay Debit Card transactions to create a cost-effective value proposition for ecosystem stakeholders, increase merchant acceptance footprints and faster migration from cash payments to digital payments.

In line with the objective of 'Sabka Saath, Sabka Vikas', this incentive scheme rolled by Cabinet intends to facilitate the building of a robust digital payment ecosystem and promote RuPay Debit Card and BHIM-UPI digital transactions.