Govt limits incentives for UPI transactions
Move comes after reports of misuse of cashback scheme
The government has decided to limit the cashback incentive for transactions using the Unified Payments Interface (UPI) from ~750 a month per person to a maximum of ~150 in a lifetime. The move is aimed at ensuring that public money does not go waste, with many people gaming the system.
The Ministry of Electronics and Information Technology is set to come out with a notification in this regard.
The cashback scheme was last amended in April, when it was extended to people transacting on other banks’ UPI platforms. People were eligible to make up to ~750 a month by just transferring funds to unique users.
Business Standard reported last week how people were attempting to game the scheme by downloading multiple banks’ apps and forming WhatsApp groups to get new people to transfer money in order to make ~750 a month. Blog posts and YouTube videos offering tutorials on the same continue to flood the internet.
The government had already spent ~1 billion by giving these cashbacks in the last three months, an official said. The idea behind the new limits, he added, was to prevent the misuse in future as people discover ways to do the jugglery of funds.
The scheme has also been restricted to the BHIM app users now, as opposed to all banks participating earlier.
“We are worried about people downloading and not using it but getting incentives, so we want to modify it for merchants. We want to minimise users and continue the scheme in person-to-person transfers,” he told Business Standard on condition of anonymity.
The government has also completely stopped the incentive scheme for merchants, which ran through the BHIM app, as it seeks to develop a new incentive structure for retailers. The idea is to boost merchant transactions on the UPI.
“Merchant transactions didn’t take off as much as person-to-person money transfers. Merchants are important to develop the ecosystem. If a merchant starts insisting on BHIM, then they will also benefit,” a source said.
Even as the government does a rethink on the incentive scheme, it continues to subsidise all digital transactions done through debit cards up to ~2,000. This scheme is also part of the ministry’s Digidhan Yojana, which seeks to boost digital transactions.
However, a source with the direct knowledge of the matter said incentives would remain necessary in the government’s vision to boost transactions even as it sought to amend the way they were structured.
“There’s a possibility of misuse but it can get bigger if we keep on with this structure. Even if people use the app to help their friends make money, we also benefit because new users are coming into the digital fold,” the source said.
Meity is looking to propose a bigger incentive scheme for merchants, which is yet to be approved by the banks involved. The ministry will then make demands for money to be released from the expenditure department and budgetary allocations will have to be made accordingly in order to launch the scheme in the next two months, according to estimated timelines.