Government Launches ₹1,500 Crore Incentive to Boost Low-Value BHIM-UPI Transactions
The government has introduced a ₹1,500 crore incentive scheme for the financial year 2024–25 aimed at promoting low-value digital transactions through BHIM-UPI. The scheme focuses on encouraging person-to-merchant (P2M) payments under ₹2,000, particularly benefiting small and micro businesses across the country.
The initiative reflects the government’s ongoing commitment to expanding the digital economy, reducing cash dependency, and increasing financial inclusion among rural and semi-urban populations.
BHIM-UPI Incentives for Small Merchants
Under the scheme, small merchants will receive a 0.15% incentive on each transaction up to ₹2,000 made through BHIM-UPI. This move is intended to drive digital adoption by making it more financially viable for smaller vendors to accept UPI payments without bearing any transactional cost.
In addition, the zero Merchant Discount Rate (MDR) regime continues to be upheld, ensuring merchants do not face deductions from their earnings when they accept digital payments. This removes any deterrent for small traders in rural and urban areas from integrating digital infrastructure into their daily operations.
Bank Payout Structure Linked to Performance
To ensure smooth execution and robust infrastructure, 80% of the claimed incentive will be disbursed to acquiring banks unconditionally on a quarterly basis. The remaining 20% will be released based on performance parameters — namely, maintaining a technical decline rate below 0.75% and system uptime of at least 99.5%. This structure is intended to promote efficient and reliable digital payment services.
Driving Digital Inclusion Nationwide
The scheme specifically aims to deepen digital payment penetration in Tier 3 to Tier 6 cities and remote regions. By targeting smaller transactions and incentivizing merchants, the government hopes to bring a wider base of users into the digital payments ecosystem, ensuring accessibility and affordability.
This new scheme builds on previous efforts by the government to promote digital payments, reflecting an increased focus on grassroots-level financial technology adoption. With UPI now widely accepted across various sectors, the scheme is expected to create lasting behavioural change in both merchants and consumers.
By providing the right incentives, the government continues to push for a cash-lite economy that is faster, more transparent, and inclusive for all segments of society.
