Budget 2026: ₹2,000cr incentive scheme announced for UPI, RuPay cards
What's the story
Finance Minister Nirmala Sitharaman has announced a ₹2,000 crore incentive scheme for Unified Payments Interface (UPI) and RuPay debit card. The announcement was made during the presentation of the Union Budget. The new scheme is close to the revised estimate of ₹2,196 crore for FY25-26 but falls short of industry expectations which were around ₹4,500 crore.
Growth trajectory
UPI's growth and subsidy requirements
UPI has been witnessing a 30% annual growth rate in transaction volume and value. In January alone, the platform processed over 21 billion transactions worth over ₹28 lakh crore. Payment companies estimate that UPI needs an annual subsidy of around ₹10,000-12,000 crore to cover costs for upgrading digital infrastructure and expanding into new segments.
Policy decisions
Previous year's budget allocation for UPI
In a bid to promote digital payments, the government made UPI transactions free for users. It also promised to reimburse payment firms for costs incurred in facilitating these transactions. Last year, the government had allocated ₹3,500 crore as subsidy for UPI under this policy. For FY25-26, the projected subsidy bill was around ₹6,000 crore, ₹4,500 crore short of industry demands.
Industry requests
PCI's recommendations on Merchant Discount Rate (MDR)
The Payments Council of India (PCI), representing payment and fintech companies, has sought the reintroduction of 30bps or 0.3% as Merchant Discount Rate (MDR) on UPI payments for large merchants. These are merchants with an annual turnover exceeding ₹40 lakh. PCI also sought the government's consideration of MDR for all RuPay debit card transactions, similar to existing MDR rates for credit cards (around 2%) and non-RuPay debit cards (around 0.75-0.9%).