Cabinet Approves ₹1,500 Crore Incentive Scheme for UPI P2M Transactions Up to ₹2,000
Cabinet Approves ₹1,500 Crore Incentive Scheme for UPI P2M Transactions Up to ₹2,000
In a major push to digital payments, the Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a ₹1,500 crore incentive scheme to promote low-value BHIM-UPI person-to-merchant (P2M) transactions for small merchants.
Under this scheme, P2M transactions up to ₹2,000 will be eligible for zero cost or MDR (Merchant Discount Rate) and an incentive of 0.15% per transaction value. The initiative aims to encourage small merchants to accept UPI payments without incurring additional costs.
Implementation Timeline & Future Plans
The scheme will be implemented from April 1, 2024, to March 31, 2025. Additionally, Union Minister Ashwini Vaishnaw confirmed that it will be extended for FY 2025-26 as well.
Key Highlights of the Incentive Scheme
- 0.15% incentive per transaction for P2M transactions up to ₹2,000.
- 80% of the claimed incentive will be disbursed to acquiring banks without conditions.
- Remaining 20% will be subject to two conditions:
- 10% will be granted if the technical decline rate of the acquiring bank is less than 0.75%.
- 10% will be provided if the bank’s system uptime is greater than 99.5%.
MDR & UPI Regulations
As per the Reserve Bank of India (RBI), MDR charges up to 0.90% apply across all card networks for debit cards. However, for UPI P2M transactions, MDR is capped at 0.30% by the National Payments Corporation of India (NPCI).
To further boost digital transactions, the government had earlier made MDR zero for RuPay debit cards and BHIM-UPI transactions in January 2020 by amending:
- Section 10A of the Payments and Settlement Systems Act, 2007
- Section 269SU of the Income-tax Act, 1961
Boost for Digital Payments in India
The approval of this incentive scheme is expected to further accelerate India’s transition to a cashless economy, ensuring seamless, low-cost digital transactions for small businesses.
