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Government’s scheme for BHIM cashbacks and referrals extended; why?

The ministry of electronics and information and technology (MeITY) has extended the referral bonus scheme, merchant cashback programme and BHIM Aadhaar merchant incentive scheme will continue till March 31, 2018. The ministry also modified some of the criteria for getting the cashbacks and incentives.

  1. For the referral bonus scheme: The new rules say that the bonus will be given Rs 50 after users do three unique transactions. The referee (new user) and the referrer will now get Rs 25. Earlier, the referee would get Rs 10 and the new user would get Rs 25.
  2. Merchant cashback programme: For merchants to get cashbacks, they now need to complete 20-50 transactions per month to get a bonus cashback of Rs 50. For more than 50, transactions merchants will get Rs 2 per transaction up till Rs 950. In total, merchants can get back Rs 1000 per month. The minimum transaction value of a payment needs to be Rs  25. Earlier, for 50-100 credit transactions per month, they would get Rs 100 at the end of the month, and then subsequently Rs 50 paise per transaction.It needs to be pointed out that banks and the NPCI are allowed to charge merchants a higher fee than compared to P2P payments on the UPI. The merchant discount rate (MDR) — the fee borne by the seller to provide services—is 0.25% for payments below Rs 1,000 and 0.65% for all other charges. As such, the government is effectively trying to subsidize the cost of the transactions for merchants.

Why is the government doing this?

It needs to be stressed again the BHIM was built by the National Payments Corporation of India (NPCI) – which is a bank-led organization and that the government has no equity stake in the organization. We pointed out that taxpayer money is funding app downloads, consumers referrals and cashbacks to use BHIM, which has been accounted for in the Union Budget.

NPCI says that it “takes the role of implementing agency for the scheme since the BHIM platform is owned and operated by NPCI and uses the transaction data to identify the eligibility and for computation of the cashback.”

There is a potential conflict of interest in the case of a body (NPCI) which owns an exchange (UPI) running a consumer product (BHIM) which competes with other consumer products (many many apps) which rely on the exchange (UPI).As Nikhil pointed out, from an industry standpoint, especially in case of the startup ecosystem, why would a VC fund a UPI based application when the government is funding and promoting BHIM?

Conflict in the number of BHIM downloads?

Ravi Shankar Prasad, the Minister of Electronics and Information Technology told Parliament, earlier this month that BHIM downloads have reached 20 million. he added that there have been close to 50 lakh (5 million) transactions on the BHIM App, worth Rs 1500 crores.

This statement came a week after the NPCI had announced that the BHIM App had received 16 million downloads. The NPCI owns and operates BHIM, and perhaps the Minister just rounded off 16 to 20, or BHIM got 4 million more downloads, which is indicative of a hockey-stick growth, because it took almost seven months for it to hit the 16 million mark.

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Downloads: Ministry notifications here, here and here.

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