UPI Incentive Scheme FY25: ₹1,500 Crore for Small Payments
Why in the news
The Union cabinet cleared an incentive scheme for small-value UPI payments in 2024-25, to keep acceptance growing among small merchants without charging them fees.
Scheme features
| Feature | Detail |
|---|---|
| Outlay | About ₹1,500 crore |
| Incentive rate | 0.15% per qualifying transaction, paid to banks |
| Performance link | 20% of the incentive depends on robust infrastructure and uptime standards |
| Eligible payments | UPI transactions up to ₹2,000; none above |
| Beneficiaries | Small merchants, who pay no merchant discount rate (MDR) |
Why it matters
- UPI carries no merchant fee, unlike cards, so investing in digital infrastructure is not cost-effective for banks and merchants.
- The payout encourages banks and merchants to accept small UPI payments and reduces cash reliance.
- FY 2023-24 incentive spending: ₹3,631 crore. The scheme also covers RuPay debit card transactions, backing NPCI as a homegrown option against Visa and Mastercard.
Other cabinet decisions
- Maharashtra: a new six-lane highway (access-controlled, greenfield) under the BOT model at ₹4,500.62 crore.
- Assam: a brownfield ammonia-urea complex of 12.7 lakh tonne capacity, at Namrup in Brahmaputra Valley Fertilizer Corporation Limited, costing ₹10,601 crore.
- Revised Rashtriya Gokul Mission: livestock productivity and indigenous breeds.
- Revised National Program for Dairy Development: extra ₹1,000 crore, total ₹2,790 crore for the 15th Finance Commission period.
Exam angle
- Incentive: 0.15%; performance-linked share: 20%; cap: payments up to ₹2,000.
- Terms: MDR, BOT, brownfield vs greenfield.