The National Payments Corporation of India (NPCI) has introduced a new scheme to expand UPI acceptance among small merchants. Under the new initiative, the payments body will offer incentives to banks for deploying QR codes and soundboxes to further drive transaction growth. 

The scheme will be funded through a portion of the merchant discount rate (MDR) earned by banks and other UPI ecosystem participants.

In a circular dated November 11, NPCI announced the launch of the ‘UPI Vyapaar Saksham Scheme’, which aims to address the limited availability of digital payment acceptance infrastructure among small merchants, particularly in smaller cities and towns.

The scheme will run for a period of three years from the implementation of UPI MDR, which is yet to be notified. 

The initiative will focus on merchants in Tier III to Tier VI cities, northeastern states, Jammu and Kashmir, and Ladakh. Small merchants covered under notified central government schemes, including PM SVANidhi and PM Vishwakarma, will also be eligible.

NPCI defines small merchants as businesses with an annual turnover of up to ₹40 Lakh in the preceding financial year.

The fund will be created from MDR collections rather than a separate government allocation. Each issuing bank, acquiring bank, payer payment service provider (PSP) and UPI application provider participating in UPI will contribute 5% of its MDR share to the fund. 

The contribution will exclude MDR earned from categories that are not eligible for the scheme. 

The fund will be divided into three components, with the largest allocation going towards increasing transaction volumes among existing merchants.

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