Reserve Bank of India (RBI) Governor Sanjay Malhotra has addressed the ongoing speculation regarding the potential introduction of charges for Unified Payments Interface (UPI) transactions. Speaking following a monetary policy committee announcement, Malhotra described discussions about how future changes would pan out as "too premature."
Parliamentary Bill Paves Way for Potential Fees
The debate around UPI charges comes after the Finance Ministry introduced the Payment and Settlement Systems (Amendment) Bill, 2027, in Parliament. This bill could facilitate the implementation of a Merchant Discount Rate (MDR) on various digital payment methods, including UPI.
Currently, UPI payments are free for users, a strategy that has significantly boosted their adoption across India. In contrast, other payment instruments like credit and debit cards already incur an MDR.
The Challenge of Sustainability for Free UPI
The scale of UPI has grown exponentially. According to data from the National Payments Corporation of India (NPCI), UPI transactions reached an unprecedented Rs 29.9 lakh crore in July 2026, with transaction volumes hitting 23.66 billion. As the system continues its rapid expansion, many stakeholders argue that its financial sustainability becomes challenging without an MDR.
Malhotra reiterated the RBI's primary focus: to continuously strengthen and enhance the efficiency of this public infrastructure. He stated, "Costs have to be paid by someone. We all want that this public infrastructure should continue to strengthen, become more efficient... We continue to do that. That is our primary focus as of now."
Indirect Costs and Future Outlook
While the new bill does not specify any MDR rates, it creates a legislative framework for their potential introduction. Any such levy would require further legislative approval and separate guidelines from the RBI. Speculation suggests that MDR might be applied to higher-value merchant transactions, possibly above Rs 2,000, while person-to-person payments could remain free.
Governor Malhotra also hinted that consumers might already be bearing an indirect cost. "It may be the general economy, and you don't get to see it directly. It's getting passed on; it may not be directly on the user base principle, but someone is paying the cost," he explained.
The government has previously supported low-value payments (up to Rs 2,000) to small merchants through an incentive scheme, reimbursing banks for these transactions. Malhotra concluded by emphasizing the importance of continued investment and finding sustainable means, whether through MDR or other mechanisms.