The union cabinet today approved an incentive scheme to promote the use of RuPay debit cards and low-value BHIM-UPI transactions. The scheme, which will promote the use of RuPay debit cards and person to merchant UPI transactions upto Rs 2,000, was approved in a cabinet meeting on Wednesday chaired by Prime Minister Narendra Modi.

Under the scheme, the govt will incentivise the acquiring banks by paying a percentage of value of the transactions done through RuPay and BHIM-UPI systems. According to estimates, around Rs 1,300 crore will be spent on the scheme for the financial year 2021-2022.

Talking about the scheme, Union Minister Ashwini Vaishnaw said that to further develop the RuPay and UPI payment systems, the government of India will reimburse the MDR (Merchant Discount Rate) in the person-to-merchant part of the transactions. He said that this incentive will be like an investment for digital payments. The govt will be investing Rs 1300 crore so that more people adopt digital payments.

Ashwini Vaishnaw informed that the month of November saw a record number of digital transactions in the country, with above 423 crore transactions in the month. The value of these transactions was ₹7,56,000 crore, close to $100 billion.

A statement issued by the cabinet said that 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 of digital payments in the country. It will also help in making digital modes of payments accessible to unbanked and marginalized populations, who are outside of the formal banking and financial system.

The statement added, “India today is one of the most efficient payments markets in the world. These developments have been the outcome of the initiatives of the Government of India and innovation by various players in the digital payment ecosystem. The scheme will further spur research and development and innovation in fintech space, and will help the Government in further deepening of digital payments in various part of countries.”

Today’s decision of the Modi govt to further promote RuPay and UPI will annoy global payment companies Visa and Mastercard more, which have already complained about the same. Last month, Visa had complained to the US government that the Indian government’s formal and informal promotion of RuPay hurts the company in a key market.

According to internal US govt memos accessed by Reuters, Visa executives had complained about Modi govt promoting RuPay in a meeting with U.S. Trade Representative (USTR) Katherine Tai. “Visa remains concerned about India’s informal and formal policies that appear to favour the business of National Payments Corporation of India over other domestic and foreign electronic payments companies,” the memo had said.

Earlier, Mastercard had also raised similar concerns regarding India’s homegrown payment network. In 2018, the company had lodged a protest at the USTR said that Modi govt was using nationalism to promote its rival payment network.

Global payment giants like Visa and Mastercard have a reason for worry about their Indian market because, within a few years, RuPay has become the leading debit card network in India. The Indian payment network had managed to capture a 60% share of India’s card market in 2020, as per RBI data. The share was just 15% in 2017, showing a huge jump in a short time.

References:

opindia.com - OpIndia Staff