New Delhi: The Union Cabinet on Wednesday approved a Rs 1,300-crore incentive scheme to promote digital transactions using UPI and Rupay debit cards, Electronics and IT Minister Ashwini Vaishnaw said.
The minister said that the government will reimburse transaction charges levied on digital payments made by persons to the merchant as part of the merchant discount rate (MDR).
"In the coming one year...the government will invest around Rs 1,300 crore so that more and more people move towards digital payments," Vaishnaw said.
He also said that 423 crore digital transactions valued at Rs 7.56 lakh crore took place in November.
The approved scheme will cover reimbursement on digital transactions of up to Rs 2,000, using Rupay debit cards and BHIM-UPI.
"Under the scheme, the acquiring banks will be incentivised by the Government, by way of paying a percentage of the value of transactions (P2M) done through RuPay Debit cards and low-value BHIM-UPI modes of payments, at an estimated financial outlay of Rs 1,300 crore for a period of one-year w.e.f. April 01, 2021," an official statement said.
This scheme will facilitate acquiring banks in building a robust digital payment ecosystem and promoting Rupay debit card and BHIM-UPI digital transactions across all sectors and segments of the population and further deepening digital payments in the country, it added.
The plan could further threaten the domestic market share of rivals Visa and Mastercard. Earlier this year, Visa complained to the US government that India's "informal and formal" promotion of RuPay was hurting it in one of its key growth markets.
The scheme was formulated in compliance with the Budget announcements (FY2021-22) by the government to give a further boost to digital transactions in the country.
Payments Council of India, an industry body, said the sector would "greatly benefit from this initiative".
As of November 2020, over 600 million RuPay debit cards have been issued by banks.
Deepak Chandnani, the South Asia and Middle East head of Worldline, a payment and transaction services company, said the move would provide significant impetus to RuPay.
"An acquiring bank incurs end to end costs of about 15 basis points per transaction toward processing and other costs for debit card transactions. This incentive will provide a much needed reprieve to acquiring banks and encourage further digital transactions," said Chandnani.
Started in 2012 by National Payments Corp of India (NPCI), a government backed non-profit, RuPay competes with Visa and MasterCard for the fast-growing market of digital transactions in Asia's third-largest economy.
Finance Minister Nirmala Sitharaman has publicly asked banks to promote RuPay cards to boost digital transactions in the country.
Mastercard and Visa count India as a key growth market, but have been jolted by a 2018 central bank directive for them to store payments data "only in India" for "unfettered supervisory access".
Banks are currently barred from issuing Mastercard-branded cards to new customers, after the US payments giants was found to have not fully complied with the data localisation rules.
