Will UPI Payments Remain Free in the Future?
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Synopsis
Is the era of free UPI payments coming to an end? RBI Governor Sanjay Malhotra warns of future costs associated with the Unified Payments Interface. With UPI's rapid growth, the need for financial sustainability becomes crucial. This article delves into the implications of potential charges on digital transactions.
Key Takeaways
- UPI may transition from free to fee-based transactions in the future.
- Current subsidies by the government are not sustainable long-term.
- Merchant Discount Rate (MDR) may be reintroduced.
- UPI has surpassed Visa in transaction volume.
- UPI accounts for a significant portion of digital transactions in India.
Mumbai, July 25 (NationPress) The period of entirely complimentary digital transactions via the Unified Payments Interface (UPI) may not be permanent, suggested RBI Governor Sanjay Malhotra on Friday. He emphasized the necessity for the UPI interface to transition towards financial sustainability in the coming years.
Currently, UPI transactions are free for users, with the government subsidizing costs for banks and other entities that facilitate the payment infrastructure. “Costs will eventually need to be covered. Someone has to shoulder the expense,” he remarked during an event held in the financial hub.
“Payments and money are essential for life. We must have a universally efficient system. Presently, there are no fees, as the government supports various entities like banks and other participants in the UPI payment framework. Clearly, some costs need to be accounted for,” Malhotra stated.
“Every vital infrastructure must yield benefits,” he noted, adding that for any service to be genuinely sustainable, “its costs must be paid, whether by users or collectively.”
This unprecedented scale has intensified pressure on the underlying infrastructure, predominantly managed by banks, payment service providers, and the National Payments Corporation of India (NPCI).
Due to a government-mandated policy of zero merchant discount rates, UPI transactions lack a revenue stream, leading industry participants to repeatedly highlight the model's financial unsustainability.
The Merchant Discount Rate (MDR)—a fee imposed on merchants by banks for processing digital payments, typically between 1 percent and 3 percent of the transaction amount—was eliminated for RuPay debit cards and BHIM-UPI transactions by the government in December 2019. It remains uncertain whether MDR will be reinstated or if users will also have to cover the costs of UPI infrastructure.
The comments from the RBI governor arise during a period when UPI has surpassed global payments giant Visa. India has emerged as the global leader in rapid payments, with UPI facilitating over Rs 24.03 lakh crore in payments through 18.39 billion transactions in June.
UPI now accounts for approximately 85 percent of all digital transactions in India and nearly 50 percent of all real-time digital payments globally.
Point of View
It is crucial to acknowledge the rapid evolution of digital payment infrastructure like UPI, which has revolutionized transactions in India. However, the potential shift towards financial sustainability must be approached with caution, ensuring that it does not hinder the accessibility and growth of digital payments. The Nation always supports balanced, informed discussions on these vital issues.
NationPress
26/07/2025
Frequently Asked Questions
What is UPI?
UPI, or Unified Payments Interface, is a real-time payment system developed by the National Payments Corporation of India that enables instant money transfers between bank accounts using mobile devices.
Will UPI transactions remain free?
RBI Governor Sanjay Malhotra indicated that the current era of free UPI transactions may not continue indefinitely, suggesting that costs may need to be covered in the future.
What is the Merchant Discount Rate (MDR)?
The Merchant Discount Rate (MDR) is a fee that merchants are charged by banks for processing digital payments, typically ranging from 1% to 3% of the transaction value.
How has UPI impacted digital payments in India?
UPI has significantly transformed the digital payment landscape in India, accounting for approximately 85% of all digital transactions and nearly 50% of real-time digital payments globally.
What are the implications of charging fees for UPI?
Charging fees for UPI transactions could impact user adoption and accessibility, making it essential to balance financial sustainability with the goal of widespread digital inclusion.
