Merchant-side incentives and P2P cooling-off
The government budgeted incentives for small-value UPI merchant transactions while regulators are tightening P2P flows above ₹10,000 to limit fraud, creating both carrot-and-stick effects at the merchant edge (x.com) (x.com). Those simultaneous moves change the economics and risk profile for small retailers who rely on cash-like UPI flows and may need clearer settlement practices and dispute scripts (x.com) (x.com).
India is paying to keep small Unified Payments Interface merchant payments cheap even as the Reserve Bank of India considers slowing some larger person-to-person transfers. (static.pib.gov.in) (rbi.org.in) The Union Cabinet approved a ₹1,500 crore incentive scheme on March 24, 2025 for low-value BHIM-Unified Payments Interface person-to-merchant payments in financial year 2024-25. It covers transactions up to ₹2,000 and provides a 0.15% incentive for payments made to small merchants. (static.pib.gov.in) That scheme keeps merchant discount rate at zero for BHIM-Unified Payments Interface and RuPay debit card transactions, with the government paying acquiring banks and the payout then shared with issuer banks, payment service provider banks, and app providers. (static.pib.gov.in) A merchant payment is a checkout payment to a business, while a person-to-person payment is money sent to another individual. The Reserve Bank of India’s April 9, 2026 discussion paper targets the second category, proposing a lagged credit of up to one hour for certain digital transfers above ₹10,000 to curb fraud. (rbi.org.in 1) (rbi.org.in 2) The Reserve Bank of India has not changed the rule yet. It put the proposal out for public comment on April 9, 2026 and set May 8, 2026 as the deadline for feedback through its Connect 2 Regulate portal. (rbi.org.in) The split matters at the shop counter because many small retailers use Unified Payments Interface as a cash substitute for both sales and informal transfers. A merchant scan at checkout can stay in the incentive-backed, zero-fee lane, while a transfer framed as person-to-person could face added fraud controls if the Reserve Bank of India adopts them. (static.pib.gov.in) (rbi.org.in) The policy backdrop is a payment system that has grown fast enough for India to dominate global real-time payments. A Ministry of Finance note citing ACI Worldwide said India accounted for 49% of global real-time transactions in 2023, and the Reserve Bank of India’s June 2025 Payment Systems Report said Unified Payments Interface kept expanding across the retail payments system. (static.pib.gov.in) (rbi.org.in) The fraud case for intervention is narrower than a blanket slowdown of digital payments. The Reserve Bank of India’s discussion paper focuses on “authorised push payment” fraud, where victims are tricked into sending money themselves, and the consultation page says the paper is specifically about safeguards to curb digital-payment frauds. (rbi.org.in 1) (rbi.org.in 2) For merchants, the practical question is classification and proof. If more value is pushed toward verified person-to-merchant flows and away from ad hoc person-to-person transfers, small businesses will need cleaner settlement records and faster dispute handling through the existing National Payments Corporation of India complaint system. (static.pib.gov.in) (upihelp.npci.org.in) The near-term timeline is simple: the incentive scheme already exists on the merchant side, and the fraud “cooling-off” idea is still a proposal on the person-to-person side. Until the Reserve Bank of India decides after May 8, 2026, small retailers are operating between those two tracks. (static.pib.gov.in) (rbi.org.in)
