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UPI Incentive Cut to ₹1,500 Crore: Fintech Concerns Explained

21 March 20251 min read
BANKING & FINANCEUPI Incentive Cutto ₹1,500 Crore:Fintech ConcernsExplained21 March 2025safalsetu.com

Why in the news

A smaller government incentive pool for low-value UPI payments left fintech firms worried about revenue.

Key facts

  • Outlay: ₹1,500 crore in FY25 against ₹3,268 crore in FY24.
  • Rate: 0.15% on payments up to ₹2,000, for small merchants only.
  • RBI data: UPI’s share of digital payments rose from 34% (2019) to 83% (2024).

Concerns

  • Unclear whether offline and online merchants are treated alike.
  • P2M payments above ₹2,000 are growing almost twice as fast as P2P but get no incentive.
  • Payments Council of India calls the outlay inadequate; firms may cut operations or slow innovation.

Way forward

  • Controlled MDR on large merchants above ₹40 lakh turnover.
  • Larger incentive outlay next year.

Exam angle

  • Rate 0.15% up to ₹2,000; body: Payments Council of India.

Test yourself

1. What was the incentive allocation for low-value BHIM-UPI transactions in FY25 after the cut?

The allocation was cut to ₹1,500 crore in FY25, from ₹3,268 crore.

2. What incentive rate applies to UPI transactions up to ₹2,000 for small merchants?

Small merchants get a 0.15% incentive on payments up to ₹2,000.

3. Which industry body called the ₹1,500 crore UPI incentive allocation inadequate?

The Payments Council of India (PCI) said the allocation is inadequate.

This topic is part of Daily Current Affairs 21 March 2025 (17 topics).

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