Budget 2021-22: Government earmarks Rs 1,500 crore for incentivising digital payments

Finance Minister Nirmala Sithraman during her Union Budget 2021-22 speech said the government has earmarked Rs 1,500 crore to provide financial incentive to incentivise digital payments.

The incentive may give a boost to the digital payments ecosystem in India which is dominated by the likes of Google Pay, Walmart-owned PhonePe, Paytm, amongst others.

According to the data released by the National Payments Corporation of India, UPI transactions stood at 2.1 billion in November 2020, up 7% from October 2020.

Similarly, IMPS registered 329 million transactions in November 2020, up from 319 million in October 2020, according to the data.

President Ram Nath Kovind last week during the joint sitting of Parliament of the Budget session said that over Rs 4 lakh crore worth of digital transactions were facilitated by UPI in December 2020 and more than 200 banks are linked to the UPI system.

Notably, the state-run payments processor NPCI had said third-party payments apps will not be allowed to process more than 30% of the total volume of transactions on UPI’s framework.

It also said that companies such as Google and PhonePe, which currently exceed the specified limit, will get two years to comply with the new laws.

To encourage digital payments in the country, Sitharaman in her 2019-20 Budget Speech had said digital payment options such as BHIM, BHIM UPI, UPI-QR Code, Aadhar Pay among others can be used for promoting a cashless economy.

She had also said that companies having an annual turnover of more than Rs 50 crore can offer these payment options to their customers, and no Merchant Discount Rate (MDR) would be levied on them or their customers.