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Context:

• The Union Cabinet approved an outlay of ₹2,600 crore to promote payments using RuPay cards and the Unified Payments Interface (UPI).

Details:

• The fund will be paid to banks in view of the lack of a Merchant Discount Rate (MDR) — a commission on digital transactions — for UPI and RuPay transactions. 
• There have been complaints from the Reserve Bank of India (RBI) and banks, as there is a lack of financial sustainability of building digital payments infrastructure in the absence of payments needed to scale and maintain them.

Significance if the Incentive Scheme:

• Total digital payments transactions have registered a year-on-year growth of 59%, rising from [₹]5,554 crore in FY2020-21 to [₹]8,840 crore in FY2021-22.”
• This recent Incentive Scheme will also promote UPI Lite and UPI 123PAY as economical and user-friendly digital payments solutions and enable further deepening of digital payments in the country.

Digital Payments in India:

• India since independence has remained a cash dependent economy. India’s cash to GDP ratio is 13 % whereas the global average is a maximum of 8%.
• The Indian government has been trying to go cashless to counter problems like illegal transactions, money laundering, black money ete. Demonetization was a big step towards going cashless and getting transactions digitized.
• Since then there has been a big shift and today we can see hawkers and tea-sellers accepting digital payments in many parts of India. Each month records Billions of transactions on NPCI’s UPI platform.

Must Read: https://www.iasgyan.in/air-summaries/air-discussions-january-1st-week-23

Cashless Economy: https://iasgyan.in/ig-uploads/pdf/480934.pdf

Patments Vision 2025: https://www.iasgyan.in/daily-current-affairs/payments-vision-2025

https://www.thehindu.com/business/Economy/cabinet-approves-2600cr-to-promote-upi-rupay-payments/article66364797.ece

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