RBI Governor Sanjay Malhotra has set off widespread debate over the future of digital payments, declaring that India’s popular Unified Payments Interface (UPI) “can’t be free forever.” Speaking at a post-policy conference on August 6, the Governor stated that despite being free for users today, UPI’s operational costs are substantial and must eventually be borne by someone. He clarified that while there is no immediate requirement for consumers to pay, the central issue is not if, but who should cover these expenses.
Malhotra’s remarks follow market speculation and discussions in financial circles after ICICI Bank introduced processing charges for payment aggregators on August 1, marking the first fees in the ecosystem. While the majority of users still pay nothing, these developments highlight mounting strain on the system’s sustainability. UPI, launched by NPCI in 2016, now handles approximately 80% of India’s retail digital payments, with over 19 billion transactions worth Rs 25 lakh crore in July 2025 alone. Despite its popularity, government subsidies are crucial to sustaining the zero-cost model. The Reserve Bank and NPCI have maintained a “no Merchant Discount Rate (MDR)” policy since January 2020, ensuring neither merchants nor consumers pay processing fees directly. Yet, as UPI scales up, the backend infrastructure operated by banks and payment service providers faces growing financial pressure.
Who Bears the Cost for UPI Today?
Governor Malhotra emphasized that UPI is not truly free—even now, the costs are being paid, largely through government subsidies. Banks and payment apps receive compensation from the government to keep UPI free for consumers and merchants. While this approach has fueled UPI’s growth and mass adoption, it depends on public funding, necessitating ongoing review of its feasibility.
The RBI chief highlighted that affordability and accessibility are central to UPI’s design but acknowledged that long-term sustainability must involve cost-sharing. The rapid scale of UPI means its infrastructure requires continuous investment in technology, cybersecurity, and compliance. In FY24, government spending to subsidise small-value UPI transactions reached around Rs 3,200 crore. With private sector participation increasing, varied fee models are already surfacing. ICICI Bank, for example, applies a charge of 2 basis points per transaction (capped at Rs 6) for payment aggregators with escrow accounts, while those without pay double.
Possible Changes: Will Users Pay for UPI in Future?
Despite rumors and concerns, the RBI Governor clarified that current policy does not require users to pay for UPI services. Decisions on charging end-users or merchants remain with the Finance Ministry, reflecting government priorities to boost digital payment adoption. However, the long-term future remains uncertain. The government could opt to reduce subsidies or introduce minimal charges either for merchants or eventually for users to ensure the system remains viable. For now, the only changes involve charges for payment aggregators, not the general public. Industry experts predict that if transaction volumes and technology costs continue to rise, banks and payment processors may push regulators to approve limited fees to keep UPI sustainable. Stakeholder consultations are ongoing, and the central bank has assured that any policy change will consider accessibility and mass adoption goals.
Digital Payments and Public Response:
Public reaction to the prospect of UPI charges has been mixed. Many consumers and businesses fear that introducing fees will impact small-ticket transactions and reduce financial inclusion. For a majority of Indians using UPI for daily payments, the ability to transfer money instantly and at no extra cost has transformed cashless commerce. As the debate continues, policymakers face the challenge of balancing advanced infrastructure investments with the need for affordable, widespread access. RBI Governor Malhotra reiterated that sustainable digital payments must be accessible, cheap, secure—and someone will have to pay for them, whether directly or indirectly. Until government subsidies are changed or withdrawn, users will not pay for UPI, but the system’s “free forever” model may gradually evolve with future policy decisions.
