Cabinet approves ₹1,500 crore incentive scheme for low-value BHIM-UPI person-to-merchant payments
The Union Cabinet on 19 March 2025 approved a ₹1,500 crore incentive scheme for 2024-25 that pays banks 0.15% on UPI person-to-merchant transactions of up to ₹2,000 for small merchants.
Summary
The Union Cabinet on 19 March 2025 approved the 'Incentive Scheme for promotion of low-value BHIM-UPI transactions Person to Merchant (P2M)' for 2024-25 (1 April 2024 to 31 March 2025) at an estimated outlay of ₹1,500 crore. Only UPI P2M transactions of up to ₹2,000 for small merchants are covered, at an incentive of 0.15% of transaction value; all UPI P2M transactions remain at zero MDR. For each quarter, 80% of the admitted claim is paid to acquiring banks without conditions; 10% depends on the bank's technical decline being below 0.75% and the other 10% on system uptime above 99.5%. The scheme targets a total of 20,000 crore transactions in 2024-25 and wider UPI use in tier 3 to 6 cities through products such as UPI 123PAY and UPI Lite.
Key facts
- Date
- 19 March 2025
- Outlay
- ₹1,500 crore, FY 2024-25
- Covers
- UPI P2M up to ₹2,000, small merchants
- Incentive
- 0.15% of transaction value
- Payout split
- 80% unconditional; 10% for technical decline <0.75%; 10% for uptime >99.5%
- Target
- 20,000 crore transactions in FY 2024-25
Practice MCQs 3 questions
Up to what transaction value are UPI person-to-merchant payments of small merchants covered under the incentive scheme approved by the Cabinet on 19 March 2025?
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Correct answer: B — ₹2,000
Only UPI P2M transactions of up to ₹2,000 for small merchants are covered under the scheme.
At what rate is the incentive paid on eligible low-value BHIM-UPI person-to-merchant transactions under the 2024-25 scheme?
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Correct answer: B — 0.15% of transaction value
The incentive is 0.15% of transaction value for small-merchant transactions up to ₹2,000. 0.30% is the MDR cap NPCI sets for UPI P2M, and 0.90% is RBI's debit card MDR cap.
Consider the following statements about the BHIM-UPI P2M incentive scheme approved in March 2025: 1. 80% of a bank's admitted claim for each quarter is paid without any condition. 2. 10% of the claim is paid only if the acquiring bank's system uptime is above 99.5%. Which of the above is/are correct?
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Correct answer: C — Both 1 and 2
80% of the admitted claim is disbursed unconditionally; of the remaining 20%, 10% depends on technical decline below 0.75% and 10% on system uptime above 99.5%. Both statements are correct.