Union Minister Bhupendra Yodav announced that the Union Cabinet approved Rs2,600 crore to encourage payments using RuPay and the Unified Payments Interface. In a press release, the Cabinet stated that banks will receive this incentive money in order to promote digital payments.
Due to the inability of banks to receive a Merchant Discount Rate, (MDR) — a payment on digital transactions — for UPI or RuPay transactions, the bank will be paid. This has led to complaints by the Reserve Bank of India (RBI), and banks. These banks have been concerned about the viability of building digital payment infrastructure without the ability to pay the required payments.
The Cabinet spoke of UPI Lite, UPI 123PAY, as economically and user-friendly solutions for digital payments and the need to deepen digital payments in India. They were payment systems that have been introduced by the National Payments Corporation of India. These systems are designed to lower the burden on banks and allow transactions over older feature phones.
A previous incentive scheme to digital payments was implemented in the last financial years. According to the Cabinet, “total digital payment transactions have experienced a year-on year growth of 59%, increasing from [Rs]5,554 Crore in FY2020-21 [Rs]8,840crore in FY2021-22.”
Nirmala Sitharaman (Union Finance Minister) had previously pledged continued financial support for digital payment systems. This new scheme, however, is in line to that promise.