Cabinet Approves Rs 1,500 Crore Incentive Scheme to Boost Low-Value BHIM-UPI Transactions

The Union Cabinet, led by Prime Minister Narendra Modi, has approved an incentive scheme worth Rs 1,500 crore for the promotion of low-value BHIM-UPI transactions (P2M) for the financial year 2024-25. The move aligns with the government’s ongoing efforts to drive digital financial inclusion and encourage small merchants to adopt cashless transactions.

Government's Push for Digital Payments

The approved scheme will be implemented from April 1, 2024, to March 31, 2025 and is designed to incentivize low-value UPI transactions, particularly those below Rs 2,000. This initiative targets small merchants, ensuring they receive financial support to enhance their ability to accept digital payments seamlessly.

Key Features of the Scheme

• Incentives for Small Merchants: Small merchants will be entitled to an incentive of 0.15% per transaction for transactions up to Rs 2,000.

• Exclusion of Large Merchants: The scheme specifically benefits small businesses, while large merchants will not be eligible for the incentive.

• Performance-Based Disbursement: 80% of the admitted claim amount will be disbursed each quarter without conditions. However, the remaining 20% will be contingent on performance metrics, including:

  • Maintaining a technical decline rate of less than 0.75%.

  • Ensuring system uptime of more than 99.5%.

Financial Inclusion and Digital Growth

The initiative is expected to significantly enhance financial access for small merchants, allowing them to leverage digital transactions efficiently. The adoption of BHIM-UPI, UPI Lite, and UPI 123PAY will provide seamless, low-cost transaction options, particularly benefiting merchants in rural and remote areas. Additionally, citizens will benefit from a charge-free UPI transaction environment, reinforcing the shift towards a cashless economy.

Government's Vision for a Digital India

With a projected transaction volume target of Rs 20,000 crore in FY 2024-25, the scheme aims to:

• Strengthen India’s indigenous digital payment ecosystem.

• Expand the reach of digital transactions in underbanked areas.

• Encourage financial inclusion and economic empowerment.

• Improve digital payment security and reliability.

By incentivizing low-value transactions, the government seeks to reduce cash dependency, create a robust digital infrastructure, and empower small businesses with better credit access and financial stability.

Impact on the Indian Economy

The BHIM-UPI incentive scheme is set to revolutionize digital payments in India by:

• Enhancing the penetration of cashless transactions.

• Supporting small business growth through digital adoption.

• Encouraging financial institutions to innovate and optimize UPI services.

About BHIM-UPI

BHIM-UPI: Transforming Digital Payments in India

What is BHIM-UPI?

BHIM (Bharat Interface for Money) - UPI (Unified Payments Interface) is an indigenous digital payment system developed by the National Payments Corporation of India (NPCI) to facilitate instant, seamless, and secure money transfers. Launched in 2016 under the Digital India initiative, it allows users to send and receive money using their mobile phones without requiring bank account details.

Key Features of BHIM-UPI:

✅ 24/7 Instant Transactions – Available round the clock, including weekends and bank holidays.
✅ Interoperability – Works across different banks and financial institutions.
✅ Secure & Hassle-Free – Protected with two-factor authentication and PIN-based security.
✅ Multiple Transaction Modes – Includes QR codes, UPI IDs, mobile numbers, and Aadhaar-based payments.
✅ No Additional Charges – UPI transactions are mostly free, making digital payments more accessible.

How BHIM-UPI Works?

1. Link Your Bank Account – Users link their bank accounts to a UPI-enabled app using a registered mobile number.

2. Set UPI PIN – A unique PIN secures transactions, similar to an ATM PIN.

3. Make Payments – Transactions can be done using UPI IDs, mobile numbers, or QR codes.

Growth and Impact of BHIM-UPI in India

• As of 2024, UPI has crossed 14 billion transactions per month, processing over ₹20 lakh crore in value.

• It is widely used across sectors like retail, e-commerce, and government services, promoting a less-cash economy.

• With innovations like UPI Lite, UPI 123PAY, and cross-border UPI transactions, it is further expanding financial inclusion.

Government’s Push for BHIM-UPI

To boost small-value transactions and promote digital adoption, the Union Cabinet approved a ₹1,500 crore incentive scheme for FY 2024-25, encouraging low-value UPI payments (transactions below ₹2,000).

BHIM-UPI continues to be a game-changer in India’s digital payments landscape, making transactions faster, safer, and more accessible to millions. 

Conclusion

The Rs 1,500 crore incentive scheme for low-value BHIM-UPI transactions is a strategic move to promote financial inclusion, digital growth, and a cashless economy. As India continues to evolve into a digital-first economy, initiatives like these will empower small merchants, foster economic growth, and strengthen the nation's payment infrastructure.