Cabinet Approves Incentive Scheme for Low-Value UPI Transactions
In News
What Happened
Why It Matters
Background
History & Context
What Changed
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BEFORE: Banks faced the operational burden of processing millions of low-value P2M transactions without any revenue, as the zero-MDR rule prevented them from charging small merchants. NOW: Acquiring banks receive a direct government subsidy of 0.15 percent per transaction for payments up to ₹2,000, covering their operational costs.
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BEFORE: Previous budgetary outlays for UPI and RuPay incentives had expired or were nearing exhaustion, causing uncertainty for payment aggregators and banks regarding future infrastructure investments. NOW: A fresh ₹1,500 crore outlay provides a guaranteed financial runway, ensuring continued bank support for onboarding small and informal merchants.
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BEFORE: The cost structure of micro-transactions threatened to slow down the expansion of digital point-of-sale infrastructure in rural and semi-urban areas. NOW: The targeted incentive makes it financially viable for banks to aggressively expand merchant acquisition networks in Tier-3 to Tier-6 cities.
Prelims Angle
NCERT Connection
Practice Questions
Q1
Correct Statement(s)Which of the following statements is/are correct regarding the government's incentive scheme for low-value UPI transactions? 1. The scheme provides a 0.15 percent incentive per transaction to acquiring banks for Person-to-Merchant (P2M) payments up to ₹2,000. 2. The Merchant Discount Rate (MDR) for UPI transactions is determined by acquiring banks and is capped at 1% for small neighborhood retailers.