Free UPI Payments May Be on Borrowed Time: RBI warns of Imminent Shift in Digital Payment Model
For now, the warning is clear: the days of free UPI payments could be numbered.
Online payment users who’ve grown accustomed to free UPI transactions may soon face a reality check, with the Reserve Bank of India (RBI) signalling a possible end to the zero-cost digital payment regime. Speaking at a media event, RBI Governor Sanjay Malhotra issued a stern reminder that the sustainability of India’s rapidly expanding Unified Payments Interface (UPI)...
Online payment users who’ve grown accustomed to free UPI transactions may soon face a reality check, with the Reserve Bank of India (RBI) signalling a possible end to the zero-cost digital payment regime. Speaking at a media event, RBI Governor Sanjay Malhotra issued a stern reminder that the sustainability of India’s rapidly expanding Unified Payments Interface (UPI) infrastructure cannot rely indefinitely on government subsidies.
Currently, UPI allows users to make seamless real-time transactions without any direct charges. However, Malhotra cautioned that this zero-fee model has been made possible only because the government has been footing the bill subsidising banks, payment service providers, and the broader ecosystem that keeps UPI operational. That model, he suggested, may not be viable for much longer.
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“Payments and money are a lifeline,” Malhotra stressed, before delivering a stark warning: “There are no charges for users today, but the government is paying various stakeholders to keep this going. Obviously, some costs have to be paid. Someone has to bear them.”
The comments come at a time when UPI has exploded in scale. In just two years, the volume of daily transactions has doubled from 31 crore to over 60 crore per day. But the surge in traffic has strained backend systems, maintained largely by banks, the National Payments Corporation of India (NPCI), and other facilitators, none of whom currently earn revenue from the transactions under the zero-Merchant Discount Rate (MDR) policy enforced by the government.
Industry players have long raised concerns over the financial unsustainability of the model, warning that a failure to recover operational costs could lead to service degradation, reduced innovation, or even resistance from key stakeholders in the future.
Malhotra’s statements reinforce those concerns, painting a future where UPI may no longer remain completely free for end users. “Any important infrastructure must bear fruits,” he said while speaking at an event organised by Financial Express. cautioning that “for a service to be sustainable, its cost should be paid, either collectively or by the user.”
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The RBI Governor also addressed broader economic issues, stating that a lending rate cut remains possible under the central bank’s neutral policy stance. While India’s current inflation is at a benign 2.1%, future projections for the January-March quarter are pegged at 4.4%, keeping the RBI watchful.
As India’s digital economy matures, users may soon have to contribute directly to keep the system running.
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