The Government of India has taken a major step to encourage digital payments by approving an incentive scheme for UPI transactions. On March 19, 2024, the Union Cabinet approved a new scheme that will provide incentives on UPI transactions up to ₹2,000, particularly benefiting small traders and businesses. This move aims to increase digital payment adoption and further the vision of a less-cash economy in India.
Small Traders to Benefit from UPI Incentives
Under this scheme, traders will receive an incentive of 0.15% on UPI transactions up to ₹2,000. The primary beneficiaries will be small merchants who will be encouraged to adopt digital payment solutions. By offering financial incentives, the government hopes to boost cashless transactions and make digital payments more convenient for businesses and consumers alike.
₹1,500 Crore Allocated for the Scheme
To implement the UPI incentive scheme, the government has set aside ₹1,500 crore for the financial year 2024-25. Union Minister Ashwini Vaishnaw announced the decision after the Cabinet meeting, emphasizing that the initiative will help small traders transition to digital payments with greater ease and confidence.
Banks to Receive Incentives Based on Performance
The incentive scheme also includes provisions for banks, ensuring they maintain high-quality service while processing UPI transactions. 80% of the incentive will be given to banks unconditionally. However, the remaining 20% incentive will be linked to specific conditions:
- 10% additional incentive if the bank’s technical failure rate remains below 0.75%.
- Another 10% incentive if the bank maintains system uptime above 99.5%.
These conditions aim to enhance the efficiency and reliability of UPI payment services, ensuring customers can make transactions without disruptions.
How Will the General Public Benefit?
This incentive scheme will make digital payments faster, safer, and more accessible for the public. With no extra charges on UPI transactions, customers can confidently switch to digital payments. This step will also improve digital credit access, making financial services more inclusive for all users.
Promoting a Less-Cash Economy
The government’s UPI incentive scheme aligns with its broader goal of creating a less-cash economy. Digital payments help keep a clear record of transactions, improve transparency, and formalize the economy. Encouraging cashless transactions also supports financial inclusion, helping businesses and individuals adapt to the digital age.
With this scheme in place, India continues its journey toward a stronger digital economy, benefiting traders, banks, and consumers alike.
