Don’t want to survive on govt incentives: Payments Council Chairman on Rs 1,500 Cr UPI scheme
Vishwas Patel, who is also Joint MD of Infibeam Avenues, argued that the allocated amount is insufficient to support the processing of transactions worth Rs 246.82 lakh crore projected for 2024.
Payments Council of India (PCI) Chairman Vishwas Patel has sharply criticised the Union Cabinet’s approval of a Rs 1,500 crore incentive scheme for low-value BHIM-UPI transactions, calling the allocation paltry.
Patel, who is also Joint MD of Infibeam Avenues, argued that the allocated amount is insufficient to support the processing of transactions worth Rs 246.82 lakh crore projected for 2024.
"We were expecting the government incentive to be above Rs 5,000 crores, a little higher than last year's incentive of Rs 3,500 crores, but this paltry Rs 1,500 crore is a grave injustice," he stated. He emphasised that the current funding environment makes it challenging to onboard the “next 300 million Indians” into digital payments or expand infrastructure in rural areas.
He questioned the logic of using taxpayer money to subsidise large merchants, noting, “Why should the government incentivize us with taxpayers' money for processing transactions for large merchants? They are anyways paying 2% for credit cards.”
Highlighting the pressure on payment companies, Patel suggested charging a 0.25% fee on UPI transactions for merchants with a turnover of more than Rs 40 lakhs while keeping it free for smaller businesses.
Merchant Discount Rate (MDR) is a fee that businesses pay to banks and payment service providers for processing digital transactions.
It is typically a percentage of the transaction amount and covers costs related to payment infrastructure, fraud prevention, and settlement services. In India, UPI and RuPay debit card transactions currently have Zero MDR, meaning merchants do not pay any fee for accepting these payments.
The cabinet has approved an incentive scheme for UPI transactions, effective from April 2024 to March 2025, to promote digital payments among small merchants for transactions under Rs 2,000. Under this scheme, small merchants will receive an incentive of 0.15% per transaction while maintaining Zero MDR.
Since 2020, the government has maintained a Zero MDR policy for UPI and RuPay debit cards to encourage digital payments. Incentives were introduced to cover costs for payment service providers.
Edited by Affirunisa Kankudti