The Finance Ministry of India is set to boost its investment in the digital payment ecosystem, particularly focusing on RuPay Debit Cards and BHIM-UPI transactions.

What to know? Alarmed by the uneven growth in digital payments, the Ministry plans to allocate ₹5,016 crore for the fiscal year 2023–24, a significant increase from the previous year’s ₹2,600 crore. This move aims to compensate for the absence of the "merchant discount rate" (MDR), which was a transaction charge collected by merchants.

Under the revised scheme, transactions using RuPay cards at points of sale or online will earn the merchant's acquirer bank an incentive of 0.4% of the transaction, capped at ₹100. For specific industry programs, the incentive is 0.15% per transaction, capped at ₹6. Similarly, BHIM-UPI transactions up to ₹2,000 will grant the acquirer bank an incentive of 0.25% of the transaction amount.

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Initially introduced in fiscal 2021–22 with a ₹1,450 crore outlay, the scheme aims to offset the lost MDR revenue shared among various banks and payment service providers.

UPI reigns supreme: Despite the massive growth in UPI transactions, RuPay has seen a decline in volume, prompting the Ministry to revise the scheme and introduce new features like UPI Lite and UPI LiteX for low-connectivity areas.

The scheme, now overseen by the Department of Financial Services after being transferred from MeitY, awaits Cabinet approval for implementation. This strategic move is expected to further stimulate the digital payment sector in India, encouraging more widespread adoption and usage.

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