Centre sanctions ₹1,500 crore to promote low-value UPI transactions through incentives

Government Approves ₹1,500 Crore UPI Incentive to Boost Digital Payments

In a significant move to strengthen India's digital payment ecosystem, the Union Cabinet has greenlit a ₹1,500 crore incentive scheme for banks promoting UPI transactions. The decision, announced on Wednesday, aims to accelerate the adoption of digital payments among small merchants and businesses across the country, particularly in semi-urban and rural areas where cash transactions still dominate.  

The incentive program targets the growing Unified Payments Interface (UPI) platform, which currently processes a staggering 10 billion transactions every month. Despite this massive volume, many small shopkeepers, street vendors, and rural entrepreneurs remain hesitant to switch from cash to digital payments due to various challenges. The new scheme specifically focuses on rewarding banks for enabling small-ticket UPI transactions (under ₹2,000), which typically offer minimal revenue for payment service providers.  

Finance Minister Nirmala Sitharaman emphasized that this initiative aligns with the government's vision of creating a less-cash economy while ensuring inclusive growth. "This scheme will help bring more small businesses into the formal digital payment system, benefiting both merchants and consumers," she said. Banking industry leaders have welcomed the move, noting that the financial incentives will encourage them to expand UPI services to previously underserved markets.  

For small business owners like Meena Devi, who runs a vegetable stall in Varanasi, the announcement brings hope. "If setting up UPI becomes easier and more rewarding, I won't have to worry about keeping change or the risks of handling cash," she shared. Similar sentiments were echoed by Ramesh Patel, a tea shop owner in Ahmedabad, who added, "Digital payments mean more customers can buy from me, even if they don't have cash handy."  

The government plans to implement the incentive scheme over the coming fiscal year, with close monitoring of its impact on digital payment adoption rates. Financial technology experts predict this could be a game-changer for India's payment landscape, potentially increasing UPI's market share while fostering innovation in the fintech sector. As India continues to position itself as a global leader in digital payments, this latest initiative underscores the government's commitment to making digital transactions accessible and beneficial for all segments of society.