Cabinet Approves ₹1,500 Crore UPI Incentive for FY 2024-25
Context:
The Union Cabinet has approved an incentive scheme of ₹1,500 crore for Unified Payments Interface (UPI) transactions below ₹2,000 for the financial year 2024–25.
- The scheme aims to promote small-value digital payments and strengthen the UPI ecosystem.
Relevance:
GS-02 (Government policies and interventions)
New UPI Incentive Structure (FY 2024-25):
- Incentive Rate: Banks will receive a 0.15% incentive on UPI transactions below ₹2,000.
- Performance-Based Incentive: One-fifth of the incentive (0.03%) will depend on the bank’s infrastructure performance over the year.
- No Incentive for Higher Transactions: Payments above ₹2,000 will not receive any incentive from the government.
- Objective:
- Encourage small merchants to accept UPI payments without merchant fees.
- Unlike card-based payments (which involve merchant fees), UPI payments remain free for small merchants.
- Government’s Digital Push:
- The government targets ₹20,000 crore in total UPI transaction volumes in FY 2024-25.
- In FY 2023-24, ₹3,631 crore was disbursed as incentives to banks for UPI and RuPay debit card transactions, exceeding the combined payouts of the previous two years.
- The scheme reflects the government’s focus on balancing the growth of digital payments while managing the financial burden on the exchequer.
What is Unified Payments Interface (UPI)?
- UPI is an advanced version of Immediate Payment Service (IMPS).
- It functions round-the-clock, enabling cashless payments faster, easier and smoother.
- Key Facts about UPI:
- Largest NPCI System: UPI is the largest platform operated by NPCI, surpassing NACH, IMPS, AePS, BBPS, and RuPay.
- Top UPI Apps: Popular apps include PhonePe, Paytm, Google Pay, Amazon Pay, and the government-backed BHIM.
- International Linkage: UPI is linked to Singapore’s PayNow for cross-border transactions.
- Launch: UPI was launched in 2016 with 21 member banks.
Prelims Question:
Consider the following statements regarding payments:
- UPI was launched by the National Payments Corporation of India (NPCI) in 2016.
- UPI is linked to Singapore’s PayNow for cross-border transactions.
- UPI allows only domestic transactions and cannot be used for international payments.
Which of the statements given above is/are correct?
a) 1 and 2 only
b) 2 and 3 only
c) 1 and 3 only
d) 1, 2, and 3
Correct Answer: a) 1 and 2 only
- Statement 1: Correct: UPI was launched by NPCI in 2016 with 21 member banks.
- Statement 2: Correct: UPI has been linked to Singapore’s PayNow for cross-border transactions.
- Statement 3: Incorrect: UPI allows international payments through linked systems like PayNow.
