Govt Likely To Withdraw BHIM-UPI Incentive Scheme As UPI Moves To Differentiated MDR

New Delhi, Sep 19 (KNN) The government is likely to withdraw the existing incentive scheme for BHIM-UPI and RuPay debit card transactions as India shifts towards a differentiated pricing framework for certain UPI merchant payments, government officials said.

Instead, around 5 per cent of Merchant Discount Rate (MDR) collections is likely to be earmarked for a dedicated fund to support small merchants and promote digital payment adoption, particularly among underserved businesses.

BHIM App Set For Revamp

The government is also working on a revamped version of the BHIM app and is likely to relaunch it. The changes come as the UPI ecosystem moves towards a revenue-based model after years of zero MDR for merchant transactions, reported CNBC.

From October 15, a 0.4 per cent MDR will apply to eligible person-to-merchant UPI transactions above Rs 2,000, subject to a maximum charge of Rs 300 per transaction.

Person-to-person transactions and merchant payments up to Rs 2,000 will continue to remain free, while insurance and capital-market transactions will have separate rates.

Fund To Support Small Merchants

Deepak Chand Thakur, MD and CEO, Network People Services Technologies, said the new framework includes a dedicated fund aimed at promoting digital payments in Tier 3-6 cities, northeastern states and among small merchants.

He said the mechanism could support greater financial inclusion while helping the digital payments ecosystem move towards a sustainable revenue model.

CA Dilip B Desai, Founder and Chairman, Desai Haribhakti Consultancy, Desai Haribhakti, said businesses would also need to assess the tax and accounting implications of MDR.

He advised merchants to align invoices, tax credits and payment records, while SMEs should strengthen accounting and reconciliation processes to match transaction-level MDR and applicable GST with bank and payment gateway statements.

(KNN Bureau)