Govt slashes UPI cashback scheme limit to total of Rs 150 per person

In a bid to ensure that public money isn't wasted with people gaming the system, the government has decided to limit the incentives available to Unified Payments Interface from Rs 750 a month to just Rs 150 per person in the full life cycle, sources said. A notification in this regard is set to come out in a couple of days which will make it clear that the Ministry of Electronics and Information Technology is looking to limit the outflow through this cashback scheme. 

It is important to note here that this scheme was amended only in April when it was extended to people transacting on other banks’ UPI platforms as people were eligible to make up to Rs 750 by just transferring funds to unique users. Business Standard had 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 Rs 750 a month as free money. Blog posts and YouTube videos offering tutorials on the same continue to flood the internet. 

The government has already spent Rs 1 billion in the last three months of the scheme in giving these cashbacks, an official stated. He added that the idea is to prevent misuse in the future as people discover ways to do the jugglery of funds. After assessment, it turns out that the scheme is stabilising and transactions increased a lot even though there were a complaints on the misuse of the scheme, said the official. The scheme has also been limited to only 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 schemes in person to person transfer,” he told Business Standard on the condition of anonymity.

Another major development in this regard is that the government has completely stopped the merchants’ incentive scheme which ran through BHIM app as it seeks to develop a new incentive structure for retailers. The idea is to boost merchant transactions in UPI as those have not taken off in a big way so far and funds from the person to person incentive scheme are likely to be routed for that purpose. 

“Merchant transactions didn’t take off as much as person to person money transfer. 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 Rs 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 that incentives will remain necessary in the government’s vision to boost transactions even as it seeks to amend the way they are 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 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. 

No more cash for digital transactions

● Government amends UPI cashback scheme to limit incentives 

● Only BHIM-UPI users can claim incentives up to Rs 150 in total 

● Earlier, people could make up to Rs 750 a month by transferring funds

● Video tutorials on gaming the system flooded YouTube

● Reports of potential misuse caused the rethink, sources said 

● Merchant cashback scheme stopped, to be reintroduced soon