Author: Amol Kulkarni Promotion of digital payments has been stated objective of the Government of India. In the last one year, the Government has broadly used three types of tools to promote digital payments. These are: financial, operational, and regulatory. The sections below discuss these tools and attempt to examine their effectiveness. 1. Financial tools: The Government provides financial incentives in form of cashback and bonus to individuals and merchants undertaking digital payments. To this end, it has launched schemes like BHIM Aadhaar Merchant Incentive Scheme,  BHIM Cashback Scheme for Merchants,  and BHIM Referral Bonus Scheme for Individuals.  For six months starting 14 April 2017, a budget outlay of INR 495 crore was made for BHIM Cashback Scheme for Merchants, and BHIM Referral Bonus Scheme for Individuals. Pursuant to notifications dated 14 August 2017, all three schemes were extended till 31 March 2018. In addition, the Government has recently decided that the Merchant Discount Rate (MDR) applicable on all debit card/BHIM UPI/ Aadhaar Enabled Payment System transactions up to INR 2,000 will be borne by the Government for a period of two years with effect from 1st January, 2018 by reimbursing the same to the banks. This is estimated to cost the exchequer around INR 1,050 crore in 2018-19 and INR 1,462 crore in 2019-20.  In other words, at least INR 3,000 crore of taxpayers’ funds are being used to provide financial incentives for promoting digital payments. It may be recalled that BHIM (Bharat Interface for Money)…
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