In a major move to promote digital payments and reward Unified Payments Interface (UPI) users, the Indian government is planning a new scheme that could bring cashbacks or discounts to those who pay via UPI. This initiative could not only make digital transactions more appealing but also reduce the burden on small shopkeepers who often face charges on credit card payments.

According to sources close to the matter, the Ministry of Consumer Affairs is working on a plan to pass on UPI’s cost benefits directly to consumers. The idea is simple: while shopkeepers enjoy zero Merchant Discount Rate (MDR) on UPI payments, consumers too could get a ₹2 discount on every ₹100 spent if they choose to pay using UPI.

In simple terms:

• Buy something worth ₹100.

• Pay ₹98 via UPI.

• Save ₹2 instantly.

• But if you use a credit card, you’ll still pay the full ₹100.

Whenever you use a credit card, the shopkeeper pays a 2-3% fee (MDR) to the bank or payment network (like Visa or MasterCard). That means for every ₹100 spent, the merchant only gets ₹97–₹98.

• Example: On a ₹100 sale via credit card:

  • ₹2–₹3 goes to the card company or bank.

  • The shopkeeper ends up absorbing this cost.

In contrast, UPI payments are free, so the shopkeeper receives the full ₹100. This cost-efficiency is what the government now wants to share with UPI users.

If implemented, this plan could lead to direct discounts or cashback on UPI transactions, helping consumers save money and encouraging a wider adoption of digital payments.

• Boosts use of UPI over costlier credit card transactions.

• Offers financial incentives to everyday users.

• Supports small and medium merchants who prefer UPI.

The government is planning to hold high-level meetings in June 2025 with key players, including:

• E-commerce companies (Amazon, Flipkart)

• Banks and payment networks

• NPCI (National Payments Corporation of India, which runs UPI)

This initiative is still in its early stages, but if successful, it could roll out later this year or early 2026, depending on stakeholder consensus.

UPI has already cemented its place as India’s leading digital payment system:

• 185 billion transactions in 2024–25

• Transaction value: ₹260.56 lakh crore

• 26 crore new users in 3 years

• 5.5 crore new merchants joined

• Total user base: Over 45 crore Indians

With numbers like these, the government sees a huge opportunity to make UPI even more rewarding and widespread.

While the plan sounds promising, its success will depend on:

• Support from banks and merchants

• Willingness of credit card companies to adapt

• How e-commerce platforms integrate this into their systems

Some resistance may come from sectors benefiting from MDR fees or premium cards.

Conclusion:

If approved, the government’s upcoming scheme could make UPI not just a convenient payment method but also a rewarding one. As India continues its digital journey, this could be a game-changer for millions of consumers, especially those looking to save more with every transaction.