Reimbursement scheme for RuPay Debit Card, Digital India UPSC | IAS Target IAS Target

Reimbursement scheme for RuPay Debit Card, BHIM UPI transactions

03 Jan 2022

Category : Science and Technology

Topic: Reimbursement scheme for RuPay Debit Card, BHIM UPI transactions

Context of the news:

On December 15, the federal Cabinet approved an incentive program to encourage the use of RuPay debit cards and low-value BHIM UPI transactions in the country to encourage more people to adopt digital payment methods.

Purpose of the Scheme:

  • The Cabinet has approved an incentive scheme that encourages the use of RuPay debit cards and low-value BHIM UPI transactions in the country.
  • The Federal Cabinet has an incentive program to encourage the use of RuPay debit cards and low-value BHIM UPI transactions (up to INR 2,000) in the country to encourage more people to adopt digital payment methods.
  • Union I & B Minister Anurag Thakur said the plan would cost the government 130 billion yen and explained the cabinet decision to the media.
  • IT Minister Ashwini Vaishnav, who briefed the media, added that the government would reimburse the transaction fees people paid to merchants based on the so-called Merchant Discount Rate (MDR).
  • The purpose is to encourage more people to "shift to digital payments".
The incentive applies only to personal trade transactions and not to P2P transactions that also use UPI routes. According to the statement, under this program, the government will provide incentives to the acquiring bank by paying a percentage of the transaction value through RuPay and BHIM UPI.
There were 4.23 billion digital transactions in November, worth nearly $ 100 billion in total. A government statement added that India had become one of the most efficient payment markets in the world, thanks to innovation and government support.
"This program will help advance R & D and innovation in the fintech sector and help the government further deepen its digital payments." However, trade officials complained that the Government of India is supporting and promoting RuPay.
RuPay is a product of the National Payments Corporation of India (NPCI) and holds 67 equity interests, including state-owned and private banks (both domestic and international) and payment services companies.
According to a government statement, this system will make it easier for acquiring banks to build a robust digital payment ecosystem and facilitate digital transactions using RuPay debit cards and BHIM UPI in all sectors.

Key points of the reimbursement schemes:

  • The program will fund low-value BHIM UPI transactions up to Rs 2,000 in India. Under this scheme, the government provides incentives to the acquiring bank by paying a fixed percentage of the transaction of person-to-merchant (P2M) processed by the RuPay debit card and the low BHIM UPI payment method.
  • The program will be implemented at an estimated cost of Rs. 130 billion per year.
  • This will make it easier for acquiring banks to build a robust digital payment ecosystem and promote BHIM UPI digital transactions and RuPay debit cards across all sectors and populations.
  • This will further deepen digital payments in India. The program also helps people left out of banks and society to access digital payment methods outside of traditional banks and financial systems.

Background

The government developed this scheme in line with budget 2021-22 to further facilitate digital transactions in India.

BHIM (Bharat Interface for Money)

  • BHIM is an Indian mobile payment app.
  • It was designed by the National Payments Corporation of India (NPCI). It is based on the Unified Payments Interface (UPI).
  • The app was released on December 30, 2016.
  • The app aims to facilitate direct electronic payments through banks and facilitate cashless transactions.
  • Supports all Indian banks using UPI.
  • This allows users to instantly transfer funds between 170 member banks from any two parties.

Unified Payment Interface (UPI)

  • UPI is an instant real-time payment system.
  • It was designed by the National Payments Corporation of India (NPCI). This facilitates interbank personal transaction (P2M) transactions and peer-to-peer (P2P) transactions.
  • Restrained by the Reserve Bank of India (RBI), it works instantly by transferring funds between two bank accounts on the mobile platform.
Digital India UPSC is a must-study topic for the IAS Examination.