Free UPI transactions may soon become a thing of the past, according to comments by RBI Governor Sanjay Malhotra. Speaking at the Financial Express BFSI Summit in Mumbai on July 25, 2025, he warned that India’s zero‑fee digital payments model is no longer sustainable
🔍 What the RBI Chief Said
- Malhotra stated that while UPI remains free for users today, the government subsidises banks and NPCI to maintain the infrastructure.
- He emphasised: “Payments and money are a lifeline… As of now, there are no charges. The government is subsidising various players… Some costs have to be paid”
- He added that for digital infrastructure to be sustainable, its costs must be borne either collectively or by users
📈 Why Now?
UPI usage has skyrocketed. Daily transactions have doubled from approximately 31 crore to over 60 crore over the last two years—placing enormous pressure on backend infrastructure maintained by banks and payment providers
💸 Financial Sustainability Challenges
- UPI currently generates no revenue, due to the zero Merchant Discount Rate (MDR) policy rolled out in January 2020, which waived MDR fees on RuPay cards and BHIM-UPI transactions
- Government subsidy under the incentive scheme jumped from ₹957 crore in FY 2021–22 to ₹3,268 crore in FY 2023–24, then shrank to ₹2,000 crore (estimate) in FY 2024–25, and budgeted ₹437 crore for FY 2025–26—a steep drop raising sustainability concerns
⚠️ What Could Change?
Although Malhotra stressed the final decision rests with the government, he suggested that minimal charges or reinstating MDR—especially for large merchants—might be necessary to ensure long-term stability
📌 Key Facts at a Glance
| Aspect | Details |
|---|---|
| Current Fees | UPI is free for users; no charges are applied. |
| Subsidy Mechanism | Government covers infrastructure costs via subsidies to banks/NPCI. |
| Transaction Growth | Daily UPI volume doubled from ~31 Cr to over 60 Cr in ~2 years. |
| Sustainability Concern | Costs rising; subsidy shrinking. Revenue generation may become essential. |
| Future Outlook | MDR reintroduction or user charges possible; no decision yet. |
🧭 Why It Matters
UPI has transformed India’s payment landscape—it now accounts for roughly 85% of all digital transactions in the country and nearly 50% globally Business Today. The RBI governor’s remarks signal a potential rethink in policy—especially at a time when India is expanding UPI internationally.
🔚 Bottom Line
While free UPI transactions have driven rapid financial inclusion and adoption, RBI Governor Sanjay Malhotra cautions that the model may no longer be viable without a sustainable funding structure. As UPI scales further, the era of zero‑cost transactions may soon come to an end.
