42% low in Budget allocation, Industry concerns high
Budget allocation of Rs. 1,441 crore with a cut of 42% in promotion of digital payments raises concern about the future growth and sustainability of UPI and other digital payment methods. This amount was approximately double at Rs 2,485 crore in last year’s budget.
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The Finance Minister had introduced the budget, but this budget raises concerns about the future growth and sustainability of UPI and other digital payment methods as the government has cut the budget by 42% for the promotion of digital payments.
This reduction in digital payment incentives raises concerns about the future growth and sustainability of UPI and other digital payment methods, especially given the significant costs involved in maintaining the payment infrastructure.
In the fintech industry, it becomes a thorny issue after the budget’s reduced preliminary allocation of Rs 1,441 crore to incentivize digital payments done via RuPay debit cards and UPI. This becomes more worrying as this amount is much lower than the initial plan to allocate Rs 3,500 crore that was mentioned in the interim budget presented by the finance minister in February.
The reduction in the outlay comes even as industry stakeholders have time and again called for the implementation of the merchant discount rate (MDR) regime for Unified Payments Interface (UPI) transactions.
Earlier this month, Amazon Pay India CEO Vikas Bansal said that “some sort” of MDR was essential for smaller UPI players to “receive a fair share for the value they add to the payment ecosystem”.
The incentive scheme for the promotion of RuPay debit cards and low-value BHIM-UPI transactions (person to merchant) has now been reduced from the interim budget of Rs 3,500 crore to Rs 1,441 crore in this year’s Union Budget. This amount was approximately double at Rs 2,485 crore in last year’s budget. This can have a significant impact on the fintech and banking industries by promoting digital payments,” said Mihir Gandhi, partner, payments transformation, PWC India.
The reduction in the outlay comes even as industry stakeholders have time and again called for the implementation of the merchant discount rate (MDR) regime for Unified Payments Interface (UPI) transactions.
However, the government always tries to revolutionise the sector through their various schemes and policies, as we know some of the schemes of the concerned ministry. The ministry of Electronics and Information Technology launched many awareness and capacity-building initiatives under the mission, such as DIGIDHAN Melas, DIGIDHAN Vyapar Yojana, and Lucky Grahak Yojana, to create a nationwide promotion of digital payments.