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The Reserve Bank of India has indicated a significant shift in the country’s digital payments landscape, with Governor Sanjay Malhotra suggesting that the Unified Payments Interface (UPI) may not remain free indefinitely. This announcement marks a potential turning point for India’s most popular digital payment system.
Current Subsidy Framework
Currently, UPI transactions operate without charges to end users, a model sustained through government subsidies to banks and payment service providers. This zero Merchant Discount Rate (MDR) policy has been instrumental in driving widespread adoption across India’s diverse economic segments. The government has effectively absorbed all operational costs to maintain accessibility and encourage digital payment adoption.
Sustainability Concerns
Governor Malhotra’s remarks at a Financial Express event highlighted the fundamental challenge facing the UPI ecosystem. With transaction volumes doubling over the past two years to approximately six billion daily transactions, the financial burden on the government has increased substantially. The Governor emphasized that maintaining any service handling billions of monthly transactions without sustainable funding mechanisms presents long term viability concerns. Recent data shows UPI achieved a record 613 million daily transactions in June 2025, with monthly volumes reaching 18.40 billion transactions.
The rapid growth trajectory, while demonstrating UPI’s success, has created an unsustainable cost structure that requires policy intervention. The current model places the entire financial burden on government resources, which may not be feasible as transaction volumes continue expanding.
Policy Implications
The potential introduction of charges represents a delicate balancing act between financial sustainability and maintaining the accessibility that has made UPI transformative for India’s digital economy. Any fee structure implementation would need careful consideration to avoid disrupting the payment behaviors of millions of users who have embraced digital transactions.
The Governor clarified that decisions regarding the continuation of the zero MDR policy ultimately rest with the government, indicating that comprehensive policy discussions are likely underway. This suggests that any changes would be implemented through deliberate policy frameworks rather than immediate market driven adjustments.
Future Outlook
While no specific timeline or fee structure has been announced, these statements signal a transition from UPI’s growth focused phase to a sustainability focused approach. The challenge lies in developing a model that ensures long term viability while preserving the financial inclusion benefits that have made UPI a cornerstone of India’s digital payments revolution.
Also Read: India’s UPI Becomes Global Leader in Daily Payment Volume, Surpassing Visa
