BHIM-UPI Incentive Scheme for 2024-25

The Union Cabinet has approved a Rs 1,500 crore incentive to promote low-value BHIM-UPI peer-to-peer merchant (P2M) transactions for the financial year 2024-25. This initiative aims to reach a transaction volume target of 200 billion in FY25.

Incentive Structure

• The scheme distinguishes between small and large merchants for the first time.
• Small Merchants: Incentive rate of 0.15% for transactions up to Rs 2,000.
• Large Merchants: No incentive for transactions within the same value bracket.
• No incentives for transactions exceeding Rs 2,000 for any merchant category.

Industry Response

Prime Minister Narendra Modi highlighted that the scheme would enhance digital payments and 'Ease of Living'. However, industry stakeholders expressed concerns about maintaining growth momentum due to inadequate allocation.

Challenges Highlighted by Industry Players

• The current allocation may not suffice to sustain transaction processing, as Rs 4,000-5,000 crore is estimated to be needed to cover costs.
• Some emphasized the need for a low controlled MDR of 25 bps for larger merchants with turnovers exceeding Rs 40 lakh, while continuing zero MDR incentives for smaller merchants.

Past Incentives and Future Directions

• In FY24, incentives totaled Rs 3,268 crore, compared to Rs 1,802 crore in FY23 and Rs 957 crore in FY22.
• Industry expressed hope for a market-driven pricing framework for low-value transactions in the future.
• Terms include that 80% of claims by banks will be disbursed unconditionally, with the remainder subject to meeting technical conditions.

The overall aim is to promote the BHIM-UPI platform and achieve transaction volumes equivalent to Rs 20,000 crore by FY25.