BHIM UPI Incentive Plan: The Union Cabinet, led by Prime Minister Narendra Modi, has approved a ₹1,500 crore incentive scheme aimed at promoting low-value BHIM-UPI (Person-to-Merchant – P2M) transactions for the financial year 2024-25. This move reinforces the government’s commitment to expanding digital payments, particularly among small merchants, and strengthening India’s indigenous digital payment platform, BHIM-UPI.
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BHIM UPI Incentive Plan : Union Cabinet Approves ₹1,500 Crore BHIM-UPI Incentive Plan to Boost Digital Payments
🎯 Key Highlights of the Incentive Scheme
✅ Timeline: April 1, 2024, to March 31, 2025
✅ Budget Allocation: ₹1,500 crore
✅ Focus: Small merchants for UPI P2M transactions up to ₹2,000
This initiative is expected to accelerate digital adoption in tier 3 to tier 6 cities and rural areas by encouraging small merchants to accept UPI payments without any additional cost.
Scheme Features and Incentive Breakdown
The scheme eliminates the Merchant Discount Rate (MDR) for small merchants and introduces a structured incentive payout to encourage continued UPI adoption. Here’s how the incentives are structured:
🔹 Small Merchants:
- Zero MDR + 0.15% incentive on transaction value (up to ₹2,000)
- No incentive for transactions exceeding ₹2,000
🔹 Large Merchants:
- Zero MDR across all transaction values
- No incentives provided
💡 Payout Structure:
- 80% of approved claims disbursed unconditionally
- 20% conditional on performance:
- 10% if technical decline rate remains below 0.75%
- 10% if system uptime exceeds 99.5%
This approach not only rewards banks for maintaining system reliability but also ensures seamless UPI transactions, benefiting both merchants and users.
Why This Scheme Matters: Benefits for All Stakeholders
The approved plan delivers multi-fold benefits to the ecosystem by promoting digital transactions and enhancing financial inclusion.
🔹 For Citizens:
- Fast, secure, and seamless UPI payments with zero additional costs
- Greater convenience and ease of payment
🔹 For Small Merchants:
- Zero MDR costs, enabling wider adoption of UPI payments
- Increased cash flow and improved credit access due to digital footprints
🔹 For Banks and Service Providers:
- Incentives for maintaining high uptime and minimal technical declines
- Encouragement to improve digital payment infrastructure
Ambitious Targets: Expanding UPI’s Reach
The incentive scheme has set bold goals to further expand UPI’s footprint across India, particularly in underserved regions.
📈 Transaction Volume Goal: 20,000 crore transactions in 2024-25
📡 Rural Expansion:
- Promote UPI 123PAY for feature phones
- Expand UPI Lite/LiteX for offline payments
🏦 Banking Standards:
- Maintain uptime above 99.5%
- Keep technical declines below 0.75%
This focus on expanding UPI beyond urban centers is a strategic move to drive digital inclusivity and ensure that the benefits of digital payments reach every corner of India.
Funding and Historical Incentives: A Quick Recap
Promoting digital payments has been at the heart of India’s financial inclusion strategy. Over the years, the government has allocated substantial funds to support the growth of BHIM-UPI and RuPay payments.
💸 Past Incentives (₹ crore):
- FY 2021-22: ₹1,389 crore (BHIM-UPI: ₹957 crore, RuPay: ₹432 crore)
- FY 2022-23: ₹2,210 crore (BHIM-UPI: ₹1,802 crore, RuPay: ₹408 crore)
- FY 2023-24: ₹3,631 crore (BHIM-UPI: ₹3,268 crore, RuPay: ₹363 crore)
Despite the positive momentum, industry leaders believe that the ₹1,500 crore allocation for FY 2024-25 may fall short of supporting the projected transaction volume of ₹246.8 lakh crore in 2024. Experts had anticipated an allocation exceeding ₹5,000 crore to sustain UPI’s rapid growth.
Driving India’s Digital Future: What Lies Ahead?
With UPI transactions crossing 11 billion per month and the BHIM-UPI platform becoming synonymous with digital payments, the government’s renewed focus on incentivizing small merchants is a step toward achieving its vision of a less-cash economy.
However, industry experts caution that with the growing volume of digital payments, additional funding may be required to prevent the system from becoming strained. As UPI continues to scale, further investments in infrastructure and innovation will be crucial for sustaining growth.
🔮 Future Prospects:
- Deeper UPI penetration in rural India
- Broader adoption of offline UPI solutions
- Enhanced digital literacy for merchants and users
A Major Boost for Digital India
The ₹1,500 crore BHIM-UPI incentive scheme is set to play a pivotal role in driving digital inclusion, fostering small business growth, and strengthening India’s payment infrastructure. By focusing on small merchants and ensuring zero MDR for UPI transactions, the government is paving the way for faster, safer, and more inclusive digital payments.
As India marches toward a cashless future, the success of this scheme will be a key determinant in achieving the ambitious goal of making UPI the backbone of India’s digital economy.
