End of free UPI service in sight? Some costs have to be paid, says RBI governor
UPI (United Payments Interface) was launched in April 2016. Users don't have to pay any fee for the service that has become one of the finest example of public digital infrastructure in the world.
Kolkata: In slightly more than nine years, Indians have adopted UPI (United Payments Interface) in such huge numbers that it has revolutionised the way this country transacts, especially in the urban areas. After hooking a very large number of Indians, UPI is also being gradually pushed beyond the boundaries of India. The service has become so popular that in the nine years since its launch in April 2016 that in June 18.39 billion transactions involving a value of Rs 24.03 trillion was recorded in June 2025. This works out to in excess of Rs 9.27 crore per second on an average in that month.
One of the most remarkable features of UPI is that the user doesn't have to pay any fee for this more of transaction. However, going by what Reserve Government of India governor Sanjay Malhotra recently remarked at an event, users could brace themselves for an end to the free service of this mode of transaction.
Government subsidising UPI now
"Payments and money are a lifeline. We need a universally efficient system. As of now, there are no charges. The government is subsidising various players such as banks and other stakeholders in the UPI payments system. Obviously, some costs have to be paid,” Malhotra said at the event.
"As of now, there are no charges and the government is actually subsidising the various players, banks, and stakeholders in this whole UPI payments system. Obviously, some costs have to be paid; they will have to be defrayed. Right now, it’s the government which is defraying those costs. Going forward, how those costs will be met will certainly, I am sure the government will be looking at it,” the RBI governor said on July 25.
It is clear from the boss of the baking regulator that users have to pay some charges. However, he did not specify what could be the quantum of the cost. Reminding the audience that there is no free lunch, Malhotra added, "Costs will have to be paid. Someone will have to bear the cost.”
Govt to decide on Nil MDR on UPI
Also, according to the current practice there is Nil Merchant Discount Rate, popularly referred to as MDR. In simple words, it means merchants are not charged any fee for processing UPI transactions. This policy is designed to boost proliferation of UPI in the country. It is clear that the policy of the government not to charge the public or the merchants anything for UPI was to popularise digital payments in the country, which means a move away form cash and bringing more and more transactions in the official route.
The RBI governor emphasised that the decision to continue with the policy of zero merchant discount rate will lies with the government. According to reports, the decision for Nil MDR policy was adopted by the government in the beginning of 2020.
Earlier this year, a circular on MDR mentioned, "As per RBI, MDR up to 0.90% of transaction value is applicable across all card networks. (for debit cards). As per NPCI, MDR up to 0.30% of the transaction value is applicable for UPI P2M transactions. Since January 2020, to promote digital transactions, MDR was made zero for RuPay debit cards and BHIM-UPI transactions through amendments in Section 10A of the Payments and Settlement Systems Act, 2007 and Section 269SU of the Income Tax Act, 1961."