The debate over possible charges on UPI transactions has gained fresh attention after RBI Governor Sanjay Malhotra said that operating the country’s digital payments ecosystem comes with costs that “someone has to pay.”
Addressing reporters after the Reserve Bank of India’s Monetary Policy Committee (MPC) meeting, Malhotra said it would be premature to comment on whether UPI users or merchants could face charges, as the government is still working on proposed amendments to the legal framework governing digital payments.
The RBI Governor stressed that India’s digital payment infrastructure cannot function without financial support. While users currently enjoy free UPI transactions, banks, payment service providers and other stakeholders incur significant costs to maintain and expand the network. His comments come amid reports that changes to the Payment and Settlement Systems Act, 2007, could create a framework allowing the government to decide which digital payment modes will continue to receive the benefit of zero Merchant Discount Rate (MDR). Under the current law, merchants are not charged MDR for UPI and RuPay debit card transactions.
Since the zero-MDR policy was introduced in January 2020, the government has been compensating banks and payment companies through incentive schemes. However, with UPI transaction volumes growing rapidly, industry players have repeatedly pointed out that these incentives are no longer sufficient to cover the rising operational costs.
The Finance Ministry has already introduced a bill in the Lok Sabha proposing amendments to the existing law. If the legislation is approved, the government, in consultation with the Reserve Bank of India, will notify the payment methods eligible for zero MDR. According to reports, the National Payments Corporation of India (NPCI) will issue detailed operational guidelines after the new framework comes into effect. For now, there has been no announcement imposing charges on UPI transactions, and the current zero-MDR system continues unchanged.
