Fancy yourself. What would you do with Rs 495 crore ($73.5 million)?

It could get you about 100 Lamborghini Aventadors. It could get you around three Boeing 747s. You could potentially buy almost half a percent in Flipkart, which is valued at over $20 billion. But if you are the Government of India, you’d do none of that. Instead, this was the amount the government was willing to spend on cashbacks for seven months (April 2017 to October 2017) to promote the usage of the Bharat Interface for Money, a payments application known more commonly by its acronym, BHIM. Launched in December 2016, BHIM runs on the Unified Payments Interface (UPI), and is owned by the National Payments Corporation of India (NPCI), a private organisation made up of the country’s private and public banks.  

Rs 495 crore is just the tip of the iceberg, though. According to industry observers, the Ministry of Electronics and Information Technology (MeitY) is also willing to spend around Rs 2,000 crore ($300 million) every year just to subsidise the cost of bank debit card transactions below Rs 2,000 ($30). Combined with the government’s outlay to promote BHIM, the government is, theoretically speaking, willing to spend around Rs 2,500 crore ($375.8 million) every year to promote digital transactions.

This move is part of the Centre’s new mission to promote cashless transactions following the demonetisation of nearly 86% of the nation’s currency in November 2016. Cut through this number and we can infer that the government is willing to spend around Rs 208 crore ($30.8 million) every month to push cashless transactions.

But why should the government dole out cashbacks? And, even if so, why BHIM?

A level playing field?

Think of it this way. In the last three years, everyone and their uncle has jumped into the business of payments. In some form or another. There’s Google. There’s Facebook, with WhatsApp. And many, many others. Everyone wants users to transact with them. And to get these users, they are spending money. And into all of this jumps the Government of India with BHIM. The government now has two schemes—one for users and one for merchants. For users, they can get a cashback of Rs 50 ($ 0.74) after they make three unique transactions. If they refer the app to a new user, they get Rs 25 ($ 0.37). The referee (new user) will also get the same amount.

For merchants to get cashbacks, they now need to complete 20-50 transactions per month to get a bonus cashback of Rs 50. After crossing 50 transactions, merchants will get Rs 2 per transaction up till Rs 950 ($ 14). All told, merchants can recoup Rs 1000 ($14.8) per month.

The BHIM cashback programme was started in April 2017.


Shashidhar KJ

Shashidhar has been a journalist for over six years and has worked with The Times of India, The Financial Express and MediaNama, his last assignment. He is a fine bloke, and by that, I mean unusually quiet. Over the years, Shashidhar has written on several subjects. Banking, startups and technology, media, and also financial technology. He started his career on the desk at the old lady of Boribunder. At The Ken, Shashidhar works out of Mumbai and writes on telecom and financial technology. What he really wants to talk about though is his vinyl collection.

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