The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (person-to-merchant) for the current financial year.

The approved incentive scheme for promotion of RuPay Debit Cards and
low-value BHIM-UPI transactions (P2M) in FY 2022-23 has a financial outlay of Rs 2,600 crore, an official statement said on Wednesday (11 January).

Under the said scheme, acquiring banks will be provided financial incentive, for promoting Point-of-Sale (PoS) and e-commerce transactions using RuPay Debit Cards and low-value BHIM-UPI transactions (P2M) for the current financial year FY 2022-23, the statement added.

In her budget speech last year, Union Finance Minister Nirmala Sitharaman had announced government’s intent to continue the financial support for digital payments.

The scheme has been formulated in compliance with the aforesaid budget announcement, the statement said.

In the financial year 2021-22, the government had approved an incentive scheme in compliance with the budget announcement of FY22 to give a further boost to digital transactions.

"As a result, total digital payments transactions have registered a year-on-year growth of 59 per cent, rising from 5,554 crore in FY2020-21 to 8,840 crore in FY2021-22," the statement said.

BHIM-UPI transactions have registered a year-on-year growth of 106 per cent, rising from 2,233 crore in FY21 to 4,597 crore in FY22, it added.

Currently, merchants do not incur any charge when they accept payments through UPI or RuPay cards.

The zero MDR (merchant discount rate) on RuPay had impacted its transaction volume as banks had stopped promoting it, reports Times of India.

"Various stakeholders in the digital payments systems and the Reserve Bank of India (RBI) expressed concerns regarding potential adverse impact of the zero MDR regime on the growth of the digital payments ecosystem," the statement said.

Further, the National Payments Corporation of India (NPCI) had 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, it added.