Banks will receive this incentive money to promote digital payments such as RuPay cards and the unified payment interface. File | photo credit: Reuters
The Union Cabinet has approved an expenditure of ₹2,600 crore to promote payments using RuPay cards and the Unified Payments Interface (UPI), Union Minister Bhupendra Yadav announced on Wednesday. Banks will receive this incentive money to promote these digital payments, the Cabinet said in a press release.
The fund will be disbursed to banks given the absence of Merchant Discount Rate (MDR) – a commission on digital transactions – for UPI and RuPay transactions. This scheme has led to complaints from the Reserve Bank of India (RBI) and banks, the Cabinet said, who were concerned about the sustainability of building a digital payments infrastructure in the absence of the necessary payments to develop and maintain them.
“The program will also promote UPI Lite and UPI 123PAY as cost-effective and user-friendly digital payment solutions and further deepen digital payments in the country,” the Cabinet said, referring to payment systems recently introduced by the National Payments Corporation of India to reduce the load on banking networks for small transactions and enable payments on older feature phones, respectively.
Following a previous digital payments incentive program in the last financial year, the Cabinet said that “total digital payments transactions have grown by 59% annually, from [₹]5,554 crores in fiscal year 2020-21 for [₹]8,840 crore in fiscal year 2021-22.
Union Finance Minister Nirmala Sitharaman had previously pledged to continue financially supporting digital payment systems, and the Cabinet said this new program is in line with that commitment.