Key Highlights
- Banks will earn a 0.15% rebate on every UPI transaction valued under ₹2,000.
- 20% of the rebate is tied to the bank’s ability to maintain a dependable UPI infrastructure.
- Transactions above ₹2,000 are excluded from the incentive.
- The scheme seeks to accelerate digital payment uptake among micro‑merchants without imposing merchant‑side fees.
- Fiscal pressure is moderated by targeting a total transaction volume of ₹20,000 crore for FY 2024‑25.
Detailed Insights
The Union Cabinet has sanctioned a ₹1,500‑crore incentive programme for the 2024‑25 financial year, aimed specifically at encouraging banks to channel low‑value UPI payments (₹0‑₹1,999) on behalf of small retailers. Under the arrangement, banks will receive a commission equal to 0.15% of each qualifying transaction’s monetary worth. However, a fifth of this payout is contingent upon the bank’s performance metrics, chiefly the continuity and reliability of its UPI gateway services.
By removing merchant‑level charges—unlike the fee‑laden card ecosystem—the policy intends to make UPI the default settlement option for micro‑enterprises, thereby widening the nation’s digital economy footprint. The government has also set an ambitious target of ₹20,000 crore in total UPI turnover for FY 2024‑25, while ensuring that the outlay remains within manageable bounds.
In the preceding fiscal year, banks collectively received ₹3,631 crore in incentives, a sum that already eclipsed the combined disbursements of the two prior years and included rewards linked to RuPay debit‑card usage.
Key Concepts
- Unified Payments Interface (UPI): A real‑time payment system that enables interoperable transactions across banks via mobile devices.
- Incentive Rate: The percentage of the transaction value paid to banks as a reward for processing eligible payments.
- Infrastructure Reliability: Service‑level criteria—such as uptime and transaction success rate—used to gauge a bank’s technical performance.
- Merchant‑Free Model: A framework where sellers incur no direct fees for accepting digital payments.
- Fiscal Target: The predetermined total value of transactions the government aims to achieve within a financial year.