Cabinet Approves ₹1,500 Crore UPI Incentive Scheme for Banks

The Union Cabinet has approved an incentive scheme of ₹1,500 crore for banks to promote Unified Payments Interface (UPI) transactions below ₹2,000 in FY 2024–25. Banks will receive a 0.15% incentive on such transactions made by small merchants, with a portion of the payout contingent on maintaining a reliable UPI infrastructure. The initiative aims to enhance digital payment adoption, particularly among small businesses, without imposing merchant fees.

Key Highlights

Incentive for Small Transactions

• Banks will receive 0.15% of transaction value for UPI payments below ₹2,000.
• 20% of the incentive will be linked to the performance of the bank’s UPI infrastructure.

No Incentive for Large Transactions

• Payments exceeding ₹2,000 will not qualify for the incentive.

Encouraging UPI Expansion

• The scheme incentivizes merchants to accept UPI transactions without merchant fees.
• Unlike card transactions that involve charges, UPI remains free for merchants.

Gradual Reduction in Government Outlay

• The government aims to balance UPI growth while minimizing fiscal expenditure.
• The 2024-25 target is ₹20,000 crore in total transaction volumes.

Previous Year’s Payouts

• In FY 2023-24, banks received ₹3,631 crore in incentives, surpassing the previous two years combined.
• This includes incentives for RuPay debit card transactions.