Big Announcement On UPI: Cabinet Approves Incentives For P2M Transactions Up To Rs 2,000 For Small Merchants
As per the incentives scheme, all person-to-merchant (P2M) transactions for small merchants up to Rs 2,000 will be eligible for zero cost or MDR and an incentive at the rate of 0.15%.
The Union Cabinet, headed by Prime Minister Narendra Modi, on Wednesday approved a Rs 1,500-crore incentive scheme to promote low-value BHIM-UPI P2M transactions for small merchants. As per this scheme, all person-to-merchant (P2M) transactions for small merchants up to Rs 2,000 will be eligible for zero cost or MDR and an incentive at the rate of 0.15%.
The scheme will be implemented for one year between April 1, 2024, and March 31, 2025.
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Briefing reported about the Union Cabinet decisions, Union Minister Ashwini Vaishnaw said that the scheme will be continued for the next year, too, (FY25-26).
“The Union Cabinet chaired by the Prime Minister Narendra Modi today approved the ‘Incentive Scheme for promotion of low-value BHIM-UPI transactions Person to Merchant (P2M)’ for the financial year 2024-25," according to an official statement.
According to the statement, “Incentive at the rate of 0.15% per transaction value will be provided for transactions up to Rs 2,000 pertaining to category of small merchants."
For all the quarters of the scheme, 80% of the admitted claim amount by the acquiring banks will be disbursed without any conditions, it added.
According to the statement, the reimbursement of the remaining 20% of the admitted claim amount for each quarter will be contingent upon fulfilment of the following conditions:
a) 10% of the admitted claim will be provided only when the technical decline of the acquiring bank will be less than 0.75%; and
b) The remaining 10% of the admitted claim will be provided only when the system uptime of the acquiring bank will be greater than 99.5%.
As per RBI, MDR up to 0.90% of transaction value is applicable across all card networks. (for Debit cards). As per NPCI, MDR up to 0.30% of transaction value is applicable for UPI P2M transaction. Since January 2020, to promote digital transactions, MDR was made zero for RuPay Debit Cards and BHIM-UPI transactions through amendments in section 10A in the Payments and Settlement Systems Act, 2007 and section 269SU of the Income-tax Act, 1961.
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