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The Indian government has approved an INR1,500 crore ($180m) incentive scheme to promote small-value, digital payments via the country’s wildly successful Unified Payments Interface (UPI) app.
Under the plan, the government will offer a 0.15 percent incentive on transactions up to INR2,000 ($24) made via UPI at small businesses.
Payments above this amount and those made to larger merchants will not receive incentives but will continue to have zero processing fees for merchants.
This move is part of India’s broader strategy to build a cashless economy, with a target of reaching INR20,000 crore ($2.4bn) in UPI transaction volume in the 2024-25 financial year.
It follows similar government support in previous years, with INR3,631 crore ($435m) in digital payment incentives disbursed in 2023-24.
According to the government, 80 percent of reimbursements to banks will be given upfront, while the remaining 20 percent will depend on banks maintaining high service reliability.
The conditions set by the government are that 10 percent “of the admitted claim will be provided only when the technical decline of the acquiring bank will be less than 0.75 percent”, while the “remaining 10 percent of the admitted claim will be provided only when the system uptime of the acquiring bank will be greater than 99.5 percent”.
UPI has become one of the world's largest digital payment networks, and its capabilities have become increasingly sought after by other economies, including the UK, the eurozone, and the United Arab Emirates.
India’s government hopes that this initiative will spur more use of digital payments in smaller cities and rural areas, through both offline and phone-based UPI solutions.
