Centre approved ₹2,600 crore as incentive for banks to promote digital payments

Tags: Economy/Finance National News

The Union Cabinet on 11 January approved a ₹2,600 crore scheme for promoting RuPay debit cards and low-value BHIM-UPI transactions.

An overview of the news

• Under the scheme, banks will be given financial incentives in the current financial year 2022-23 to promote 'Point of Sale' (PoS) i.e. payment machines and e-commerce transactions using RuPay and UPI.

• The Cabinet has approved this incentive scheme to promote small amount transactions between individuals and merchants through RuPay Debit Cards and BHIM-UPI.

• This will further strengthen India's progress in digital payments. Finance Minister Nirmala Sitharaman had said in the last budget, will continue to provide financial help to increase digital payments.

• India has remained a cash-dependent economy since independence. India's Cash to GDP ratio is 13% while the global average is at most 8%.

Significance of the Incentive Scheme

• The government had approved an incentive scheme in pursuance of the budget announcement for FY 2022 to promote digital transactions.

• As a result, total digital payment transactions registered a year-on-year growth of 59 percent.

• This increased from ₹5,554 crore in FY21 to ₹8,840 crore in FY22.

• BHIM-UPI transactions registered a year-on-year growth of 106 per cent, from Rs 2,233 crore in FY21 to Rs 4,597 crore in FY22.

• This incentive scheme will promote as a digital payment solution and enable further deepening of digital payments in the country.