Editor's Pick: Union Cabinet approves Rs 2,600-crore UPI incentive scheme

The Union Cabinet on Wednesday approved an outlay of Rs 2,600 crore to promote an incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (person-to-merchant). The idea is to provide banks with incentive money to promote such digital payments. The fund would be paid to banks in view of the lack of a Merchant Discount Rate (MDR) - a commission on digital transactions- for UPI and RuPay Transactions. Apex banking regulator, the Reserve Bank of India (RBI) had expressed concerns about the adverse impact of the zero MDR regime on the growth of the digital payments’ ecosystem. The National Payments Corporation of India (NCPI), however, requested, among other things, 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”. The Cabinet noted in its press release, “The scheme will also promote UPI Lite and UPI 123PAY as economical and user-friendly digital payments solutions and enable further deepening of digital payments in the country, across all sectors and segments of the population.” It also referred to payment systems recently introduced by the NPCI to reduce the load on banking networks for small transactions, and to allow payments over feature phones, respectively. Digital transactions have witnessed tremendous growth over the past years, the cabinet noted. UPI facilitated a record 782.9 crore digital payment transactions worth Rs 12.82 crore in December 2022. Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor’s Pick and more. Click here. 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The fund would be paid to banks in view of the lack of a Merchant Discount Rate (MDR) - a commission on digital transactions- for UPI and RuPay Transactions. Apex banking regulator, the Reserve Bank of India (RBI) had expressed concerns about the adverse impact of the zero MDR regime on the growth of the digital payments’ ecosystem. The National Payments Corporation of India (NCPI), however, requested, among other things, 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”. The Cabinet noted in its press release, “The scheme will also promote UPI Lite and UPI 123PAY as economical and user-friendly digital payments solutions and enable further deepening of digital payments in the country, across all sectors and segments of the population.” It also referred to payment systems recently introduced by the NPCI to reduce the load on banking networks for small transactions, and to allow payments over feature phones, respectively. Digital transactions have witnessed tremendous growth over the past years, the cabinet noted. UPI facilitated a record 782.9 crore digital payment transactions worth Rs 12.82 crore in December 2022. Was this newsletter forwarded to you? Head over to our newsletter subscription page to sign up for Editor’s Pick and more. [Click here]( . 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