Cabinet approves incentive scheme for promotion of low-value BHIM-UPI transactions
Our Bureau
New Delhi
A Citi Research report has highlighted Paytm’s strong position in India’s digital payments ecosystem, despite shifts in UPI subsidy policies.
While the government has reduced the UPI incentive allocation to Rs 15 billion for FY25, Citi suggests that this move could pave the way for the introduction of Merchant Discount Rate (MDR) on large-ticket transactions, a development that may work in favor of fintech players like Paytm.
The report points out that Paytm continues to maintain a stable market share of 5.3 percent in UPI transactions, reflecting its resilience in a highly competitive industry.
The overall growth of UPI merchant payments remains strong, recording a 23 percent year-over-year increase in February 2025. Citi’s findings suggest that Paytm’s extensive merchant network and its diversified suite of financial services allow it to remain a key player in India’s digital payments revolution.
Citi analysts have set a target price of Rs 1,000 per share for Paytm, implying a potential upside of 31.1 percent.
The report highlights that the company’s strategic cost management and expansion in financial services could contribute to long-term profitability.
With digital payments in India continuing to evolve, Paytm’s ability to adapt to regulatory changes and explore new revenue streams positions it as one of the strongest contenders in the fintech space.
Despite policy adjustments, Citi Research views Paytm as a promising investment opportunity. Its well-established user base, robust technology infrastructure, and growing financial services segment create a strong foundation for future growth.
As the government considers potential MDR implementation on large transactions, Paytm could stand to benefit significantly in the years ahead.
The shares of One 97 Communications Ltd ended at Rs 733.15, down 29.95 points or 3.92 per cent, dropping about 6 per cent during the trading session today.
Meanwhile, the Union Cabinet chaired by Prime Minister Narendra Modi on Wednesday approved the ‘Incentive Scheme for promotion of low-value BHIM-UPI transactions Person to Merchant (P2M)’ for the financial year 2024-25.
The scheme to promote low-value BHIM-UPI transactions will be implemented at an estimated cost of Rs 1,500 crore.
Only the UPI transactions upto Rs 2,000 for small merchants are covered under the scheme.
Incentives at the rate of 0.15 per cent per transaction value will be provided for transactions upto Rs 2,000 pertaining to the category of small merchants.
For all quarters of the scheme, 80 per cent of the admitted claim amount by the acquiring banks will be disbursed without any conditions.
The reimbursement of the remaining 20 per cent of the admitted claim amount for each quarter will be contingent upon the fulfilment of the following conditions:
10 per cent of the admitted claim will be provided only when the technical decline of the acquiring bank will be less than 0.75 per cent; and the remaining 10 per cent of the admitted claim will be provided only when the system uptime of the acquiring bank will be greater than 99.5 per cent.
This scheme will enable small merchants to avail of UPI services at no additional cost.
“As small merchants are price-sensitive, incentives would encourage them to accept UPI payment,” the government said.
It will also supplement the government’s vision of a less-cash economy by formalizing and accounting for the transaction in digital form.
The incentive is paid by the Government to the Acquiring bank (Merchant’s bank) and thereafter shared among other stakeholders: Issuer Bank (Customer’s Bank), Payment Service Provider Bank (facilitates onboarding of customers on UPI app / API integrations) and App Providers (TPAPs).
