Union Minister Bhupendra Yadav announced Wednesday that the Union Cabinet approved a spending of Rs2,600 crore for payments using RuPay cards or the Unified Payments Interface. The Cabinet released a press release stating that this money will be given to banks for the promotion of digital payments.
Banks will receive the fund due to the absence of a Merchant Discount rate (MDR), a commission for digital transactions, which is required for UPI and RuPay transactions. The Cabinet stated that this has caused complaints from the Reserve Bank of India and banks. They are concerned about the sustainability of digital payments infrastructure building in the absence of the necessary payments to scale it and maintain it.
The Cabinet stated that the scheme would also promote UPI Lite (and UPI 123PAY) as affordable and user-friendly digital payment solutions and further develop digital payments in India. This refers to the recent introductions by the National Payments Corporation of India of payment systems to reduce the bank network load for small transactions and allow payments over older feature phone models.
The Cabinet stated that digital payments transactions in total have seen a 59% increase in year-on-year revenue, from Rs.5,554 crore in FY2020-21, to Rs.8,840 crore by FY2021-22. This was due to an incentive scheme for digital payment in the previous financial year.
Nirmala Sitharaman, Union Finance Minister, had previously committed financial support to digital payment systems. The Cabinet stated that the new scheme was in line with that commitment.
