In a major boost to digital payments, the Union Cabinet has approved an incentive scheme for Person-to-Merchant (P2M) transactions made via Unified Payments Interface (UPI) for amounts up to ₹2,000. This initiative aims to encourage digital transactions among small merchants and strengthen India's cashless economy.
What Does This Mean for Small Merchants?
The approved incentive scheme will provide financial support to banks and payment service providers to facilitate seamless and cost-effective UPI transactions. Key benefits include:
✅ Zero transaction charges – Small merchants will not have to bear any fees for accepting UPI payments.
✅ Increased digital adoption – The move is expected to encourage more small businesses, shopkeepers, and vendors to accept UPI payments.
✅ Enhanced financial inclusion – Rural and semi-urban merchants will benefit the most from this scheme.
Why the Need for Incentives?
With UPI transactions witnessing exponential growth, the government wants to ensure that small merchants are not discouraged by transaction costs. The scheme aligns with the Digital India vision and helps in reducing dependency on cash transactions, making financial transactions more transparent and efficient.
A government official stated, “By incentivizing small-value digital payments, we are supporting small businesses while strengthening India’s digital infrastructure.”
Impact on Digital Payments in India
📈 UPI transactions continue to grow, with over 13 billion transactions recorded in a single month in early 2025.
🏪 Small businesses will benefit from higher customer engagement as digital payments become more convenient.
💰 Boost to fintech and banking ecosystems, further accelerating India's digital transformation.
This decision reflects the government’s commitment to expanding the digital economy and making cashless transactions the norm. With incentives now in place, small merchants are likely to embrace UPI payments at an even faster pace.
