1 week ago
Keep UPI Free by Funding It From Savings
UPI lets people send money instantly between bank accounts using different apps.
The article says UPI is now used for a very large number of mostly small payments.
Parliament recently changed a law so the government could allow charges on some payment systems in the future.
No new UPI charge exists today.
The writer argues that charging merchants could make digital payments less attractive than cash.
Banks and the government already save money because people use less cash and fewer costly banking services.
The article says these savings should help pay for keeping UPI free.
This would encourage people and small shops to continue using digital payments.
Parliament’s 2026 amendment allows the government to notify future charges on some payment modes, though no charge is imposed today.
UPI processed more than 24,000 crore transactions worth about Rs 314 lakh crore in 2025-26.
The article says 86 per cent of merchant UPI payments are below Rs 500, making small businesses and low-value transactions especially sensitive to fees.
UPI’s operating costs are low, while the government and banks benefit from reduced cash-handling and transaction costs.
The writer proposes funding UPI through a transparent share of savings in currency management rather than imposing Merchant Discount Rate charges.
- Who
- The Indian Parliament, government, banks, payment providers, merchants and UPI users are involved.
- What
- A 2026 legal amendment removed the outright bar on future charges for BHIM-UPI and RuPay, prompting an argument to keep UPI free.
- Where
- India.
- When
- The amendment was passed earlier in 2026; the article also discusses UPI activity during 2025-26.
- Why
- The writer argues that fees could discourage small digital payments, while savings from reduced cash handling could fund UPI instead.
Keep UPI Free
Enable Future Charges
Effect on users and merchants
Keep UPI Free
The writer argues that even small fees could push price-sensitive users and merchants back toward cash, especially for low-value transactions.
Enable Future Charges
The amendment creates the legal ability for the government to notify charges on selected payment modes in the future, although it does not impose a charge now.
How the system should be funded
Keep UPI Free
The article proposes that the state return part of its savings from reduced currency printing, storage and movement to those operating UPI infrastructure.
Enable Future Charges
Under the current arrangement, banks and payment providers bear costs without earning directly from UPI transactions, while government incentives are projected to decline.
Role of MDR
Keep UPI Free
The writer says MDR is unsuitable for UPI because it was designed for card-payment costs that do not similarly apply to instant account-to-account transfers.
Enable Future Charges
Supporters of future charging could argue, based on the amendment’s enabling approach, that payment modes should be allowed to carry charges when policymakers determine that funding is needed; the article does not identify specific supporters.
Key facts
- UPI transactions
- More than 24,000 crore transactions in 2025-26.
- UPI transaction value
- About Rs 314 lakh crore in 2025-26.
- Digital payment share
- UPI accounted for about 85 per cent of India’s digital retail payments, according to the article.
- Average transaction
- About Rs 1,300.
- Small merchant payments
- About 86 per cent were below Rs 500.
- Government incentive
- Projected to fall to about Rs 437 crore, from about Rs 3,631 crore two years earlier.
- Proposed funding source
- A defined, formula-based share of savings from currency management rather than MDR.
Sources
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