The Cabinet on Wednesday approved a Rs 1,300-crore incentive scheme to promote RuPay debit cards and boost low-value transactions through the BHIM unified payments interface (UPI) application for one year starting April 2022.
The idea is to enable a vast number of people, especially in the marginalised sections of society who are outside the formal banking network, to adopt the digital payment system.
Briefing about the Cabinet decisions, electronics and IT minister Ashwini Vaishnaw said the government will reimburse transaction charges levied on digital payments made by persons to the merchant (P2M), as part of the merchant discount rate (MDR).
The government will pay a percentage of the value of the person-to-merchant (P2M) transactions done through RuPay debit cards and low-value BHIM-UPI modes of payments.
A sustained push by the government and the emergence of several payments intermediaries have driven up digital transactions in the country in recent years. The number of digital payments jumped from 1,459 crore in FY18 to 4,371 crore in the last fiscal. In November, the number of transactions on the UPI platform remained high at 418 crore, involving an amount of Rs 7.68 lakh crore.
Starting January 1, 2020, the government scrapped MDR for all RuPay and UPI transactions, although banks are allowed to impose the cost using other card payment networks. Several stakeholders in the digital payments industry have been seeking a restoration of the MDR rates.
The Cabinet decision comes ahead of a plan by the central bank to float a discussion paper on digital payment charges within a month. Announcing the monetary policy statement last week, Reserve Bank of India (RBI) governor Shaktikanta Das said the paper is aimed at ensuring that digital payment charges remain affordable to users and economically remunerative to providers.
“There have, however, been some concerns on the reasonableness of various charges incurred by customers for digital payments through credit cards, debit cards, prepaid payment instruments (cards and wallets), Unified Payments Interface (UPI) and the like. It is proposed to release a discussion paper on various charges in the payment system to have a holistic view of the issues involved and possible approaches to mitigating the concerns so as to make digital transactions more affordable,” Das said.