In a significant move to promote digital payments, the Union Cabinet on Wednesday unveiled a ₹1,500 crore UPI incentive scheme aimed at boosting small-ticket Unified Payments Interface (UPI) transactions under ₹2,000 for the fiscal year 2024–25. Under this scheme, banks will receive a 0.15% incentive, with 20% of the payout contingent on their infrastructure’s performance throughout the year. The incentives are specifically targeted at payments made to small merchants, encouraging wider adoption of UPI among smaller businesses.
For transactions exceeding ₹2,000, no government incentives will be provided. The scheme is designed to address the lack of merchant fees on UPI payments, unlike debit and credit card transactions, which typically involve fees borne by retailers. By offering this UPI incentive, the government aims to level the playing field for small merchants, enabling them to accept low-value payments without incurring additional costs.
The Union government emphasized that the scheme strikes a balance between fostering the growth of UPI transactions and minimizing the financial burden on the exchequer. This comes as digital payments continue to surge, with the UPI incentive outlay gradually decreasing over time. The government has set an ambitious target of ₹20,000 crore in total transaction volumes for FY 2024–25.
In FY 2023–24, the government disbursed ₹3,631 crore in incentives to banks, surpassing the combined totals of the previous two years. This figure includes incentives for RuPay debit card transactions, NPCI’s homegrown alternative to global payment networks like Visa and Mastercard. The latest scheme underscores the government’s commitment to strengthening India’s digital payment ecosystem while supporting small merchants and driving financial inclusion.
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