Govt. Extends Zero MDR for UPI Payments Under ₹2,000

The Union Cabinet has approved the extension of the Rs 1,500 crore incentive scheme for small-value UPI transactions. The move is aimed at supporting small merchants and encouraging digital payments by reducing costs for stakeholders in the UPI ecosystem.

The scheme covers transactions up to Rs 2,000 and will be in place for one year, from April 1, 2024, to March 31, 2025. Union Minister Ashwini Vaishnaw confirmed that the scheme will continue next year as well. Under this initiative, small merchants accepting UPI payments will receive an incentive of 0.15% per transaction.

“The Union Cabinet chaired by the Prime Minister Shri Narendra Modi today approved the ‘Incentive Scheme for promotion of low-value BHIM-UPI transactions Person to Merchant (P2M)’ for the financial year 2024-25 in the following manner: i. The incentive scheme for promotion of low-value BHIM-UPI transactions (P2M) will be implemented at an estimated outlay of 1,500 crore, from 01.04.2024 to 31.03.2025. ii. Only the UPI (P2M) transactions upto 2,000/- for Small Merchants are covered under the scheme,” said a press release on PIB.

The government had earlier said that the “Incentive Scheme for the promotion of RuPay Debit Cards and low-value BHIM-UPI transactions (Person to Merchant – P2M)” has played a key role in the rapid growth of digital payments in India.

According to official data, digital payment transactions have risen sharply in recent years. The total number of digital transactions increased from 8,839 crore in FY 2021-22 to 18,737 crore in FY 2023-24, growing at a compound annual growth rate (CAGR) of 46%. This growth has largely been driven by UPI, which recorded 4,597 crore transactions in FY 2021-22, rising to 13,116 crore in FY 2023-24.

The extension of the incentive scheme is expected to further boost digital payments, making small-value transactions easier and more cost-effective.

For customers, this means they can continue using UPI for daily purchases without any extra charges. Whether buying groceries, tea, or other essentials, they can make payments seamlessly at local stores.

For small merchants, the government’s incentive of 0.15% per transaction will help them accept UPI payments without worrying about additional costs. This is particularly beneficial for small shopkeepers, vegetable vendors, and street vendors who may have been hesitant to adopt digital payments due to transaction fees.