New Delhi, Feb 1 (IANS): Although it is not clear how the Rs 1,500 crore fund proposed in the Budget to boost digital mode of payments will be spent, industry stakeholders have said that the move will spur innovation and help increase penetration of digital payments in the country.

"To give a further boost to digital transactions, I earmark Rs 1,500 crore for a proposed scheme that will provide financial incentive to promote digital mode of payment," Union Finance Minister Nirmala Sitharaman said during her Budget presentation on Monday.

IT industry body Nascom said that the move is a "positive step towards realising a cashless economy."

The Internet and Mobile Association of India (IAMAI) has also welcomed the positive outlook on the digital industry and the push to provide support to the startup ecosystem.

"The focus on digital payments, and overall infrastructure development is a step towards realising the trillion-dollar economy and will open up new opportunities for demand generation in the country," Subho Ray, President, IAMAI, said in a statement.

The Minister's announcement of a scheme to provide financial incentive to promote digital payments is a welcome step and will further boost the digital payments ecosystem in India, IAMAI said.

"Hopefully, it (Rs 1,500 crore) will be used to reimburse losses suffered by payment service providers for processing Rupay debit cards and UPI transactions for free in the year 2020 as well as top up the Rs 500-crore fund set up by RBI (Reserve Bank of India) as part PIDF ( Payment Infrastructure Development Fund)," said Vishwas Patel, Chairman of Payments Council of India (PCI).

Harshil Mathur, CEO and Co-founder of Razorpay, said that the Rs 1,500 crore incentive will open a plethora of opportunities for fintechs to innovate for the new normal, leading to large scale adoption even in the smallest of towns and villages.

"I'm hoping the funds will be used towards developing alternatives to Zero MDR (Merchant Discount Rate) policy and initiatives towards bringing digital financial literacy in vernacular languages," Mathur said.

"These will instil trust in the system and accelerate adoption from MSMEs and entrepreneurs who are apprehensive towards moving money digitally."

"We believe that Rs 1,500 crore fund will enhance penetration of digital payments, encourage greater acceptance, enable merchants to grow and boost the digital payment space," said Anirban Mukherjee, CEO, PayU India.