Introduction: The Ministry of Finance, Department of Financial Services, has introduced a significant incentive scheme to drive the adoption of digital payments across India. This scheme, outlined in Notification No. 9/27/2023, dated 12th March 2024, aims to bolster the usage of RuPay Debit Cards and low-value BHIM-UPI transactions (Person to Merchant) for the financial year 2023-24.
Detailed Analysis:
1. Background and Rationale: The scheme stems from the government’s endeavor to propel digital transactions in the country. Despite significant growth in digital payments in recent years, there’s still untapped potential for further expansion. Hence, the incentive scheme targets promoting digital payments, particularly in underexplored markets or sectors.
2. Objective and Scope: The scheme incentivizes banks, payment system operators, and app providers to encourage transactions using RuPay Debit Cards and low-value BHIM-UPI transactions (up to ₹2,000) on a person-to-merchant basis. The incentives are calculated quarterly based on transaction values, aiming to build a robust digital payments ecosystem across various sectors and demographics.
3. Incentive Structure: The scheme allocates a financial outlay of ₹3,500 Crore, with separate provisions for RuPay Debit Cards and BHIM-UPI transactions. The incentive rates vary for different transaction categories, with additional incentives for industry-specific programs.
4. Operational Mechanisms: The scheme outlines reimbursement mechanisms for banks, quarterly claim disbursements, and eligibility criteria for reimbursement percentages. It also mandates certain growth targets and operational requirements for banks to qualify for full reimbursement.
5. Implementation Guidelines: The Department of Financial Services, in consultation with the National Payment Corporation of India (NPCI), will issue operational guidelines for effective implementation. These guidelines will detail the incentive sharing mechanism and ensure uniform application across eligible banks operating in India.
Conclusion: The incentivization scheme for promoting RuPay Debit Cards and BHIM-UPI transactions reflects the government’s commitment to fostering a digital economy. By providing financial incentives to banks and payment service providers, the scheme aims to accelerate the adoption of digital payment modes, bolstering financial inclusion and economic growth. As operational guidelines are established, the scheme is poised to play a pivotal role in advancing India’s digital payment landscape.
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MINISTRY OF FINANCE
(Department of Financial Services)
NOTIFICATION
New Delhi, the 12th March, 2024
Subject: Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (Person to Merchant) for financial year 2023-24.
No 9/27/2023 – FI (Part)1.—The Government is taking various initiatives to promote digital payments. Over past few years, digital payment transactions have witnessed tremendous growth across the country with the number of transactions growing from 2,071 Crore in financial year 2017-18 to 13,462 Crore in financial year 2022-23.
2. Although there has been an unprecedented growth in digital payments over the past few years, there is potential for further growth. It is, therefore, important to promote the adoption of digital payments, targeting untapped markets or segments or sectors.
3. In compliance with the Budget announcement (financial year 2023-24) and to give further boost to digital transactions in the country, it has been decided by the Government to incentivise the Banks and other payment system operators and app providers for promoting RuPay Debit Cards transactions and low-value BHIM-UPI transactions (upto ₹ 2,000) (Person-to-Merchant- P2M), for financial year 2023-24. The admissible incentive is to be calculated as per the transaction value processed on quarterly basis.
4. This incentive scheme will promote digital payments by incentivising banks and other payment system operators to build a robust digital payments ecosystem and to promote RuPay Debit Cards and BHIM-UPI as low-cost digital payments mode across all sectors and segments of population. In line with various digital initiatives under Atmanirbhar Bharat, the scheme will also promote transactions using indigenously-developed modes of digital payments, namely, BHIM-UPI Lite or BHIM-UPI LiteX, “UPI Conversational Payments- Hello! UPI” and BHIM-UPI 123PAY as economical and user-friendly digital payments solutions.
5. The Government approved the proposal to continue the “Incentive scheme for promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (Person to Merchant)”, for a period of one year and at a financial outlay of ₹ 3,500 Crore. This will provide financial incentive to acquiring banks as per the incentive rates and other details given below:
| Category | Incentive rate per transaction |
|
Transactions using RuPay Debit Cards at point-of-sale (PoS) and through e-commerce (ecom) |
|
| Other than industry programmes | 0.40%, capped at ₹ 100 |
| Industry programmes* | 0.15%, capped at ₹ 6 |
|
* i.e., Insurance, Mutual funds, all kind of payments to various Government departments/agencies, Education, Railways, Agriculture, Fuel, Jewellery & Hospitals |
|
| BHIM-UPI P2M transactions (up to ₹ 2,000) | |
| Other than industry programmes | 0.25% |
| Industry programmes** | 0.15% |
|
** i.e., Insurance, Mutual funds, all kind of payments to various Government departments/agencies, Education, Railways, Agriculture, Debt Collections, Fuel, Petroleum products, Point of interaction funding transaction, Telecommunications, Utility payments, Business/Personal services and Hospitals |
|
5.1 The duration of the scheme is one year from the 1st April, 2023 to 31st March, 2024.
5.2 The financial outlay for the scheme is ₹ 3,500 Crore, with ₹ 500 Crore allocated for RuPay Debit Card and ₹ 3,000 Crore allocated for BHIM-UPI. While, the allocation will be fungible from BHIM-UPI to RuPay Debit Cards but vice versa is not applicable.
5.3 Secretary, Department of Financial Services (DFS), in consultation with Financial Advisor (DFS) and National Payment Corporation of India (NPCI), may review from time to time the utilisation of funds under the scheme and, accordingly, make changes, if required, in the scheme including adding or omitting merchant categories included in industry programmes.
5.4 Reimbursement of claims of banks will be done on a quarterly basis, to the following extent, namely :-
(a) for the first, second, and third quarter of the scheme, 100 percent of the admitted claim amount for the bank to be disbursed and for the fourth quarter of the scheme, 90 percent of the admitted claim amount for RuPay Debit Card and 80 percent of the admitted claim amount for BHIM-UPI to be disbursed;
(b) the reimbursement of the remaining percentage of the admitted claim amount for fourth quarter will be subject to fulfilment of the conditions in sub-clause (i) for RuPay Debit Card and sub-clauses (ii) and (iii) for BHIM-UPI;
(i) Acquirer Bank (which submits the claims) has to show at least 5 percent growth in January’24-March’24 over Januray’23-March’23 in the number of RuPay Debit Cards transactions (PoS and e-commerce transactions) “as Issuer”, to be eligible for reimbursement of 10 percent of the remaining admitted claim of fourth quarter, that is, January’24 – March’24;
(ii) Acquirer Bank has to enable the features of BHIM-UPI Lite and BHIM-UPI LiteX “as Remitter” and to show at least 5 percent of BHIM-UPI P2M transactions on BHIM-UPI Lite or BHIM-UPI LiteX during the last quarter of the scheme, to be eligible for reimbursement of 10 percent of the admitted claim for the fourth quarter;
(iii) Acquirer Bank has to enable “UPI Conversational Payments- Hello! UPI” in app and “BHIM-UPI 123Pay” (any of the four approaches) “as Payer PSP”, to be eligible for reimbursement of 10 percent of the admitted claim for the fourth quarter.
5.5 DFS, in consultation with NPCI, will issue operational guidelines for implementation of the scheme, including the incentive sharing mechanism.
5.6 The Scheme shall be applicable to the Banks having operations in India and transactions done in India.
ABHIJIT PHUKON, Economic Adviser
