UPI Won't Remain Completely Free; Someone Has to Bear the Cost: RBI Governor's Major Statement

Reserve Bank of India Governor Sanjay Malhotra has made a significant statement regarding UPI payments. Here are the details.

Could UPI payments become costlier in the future? RBI Governor Sanjay Malhotra has addressed this question. He stated that a digital payment system like UPI cannot remain entirely free forever, as the associated costs must be borne by someone. However, this does not mean that ordinary users will immediately start paying fees for using UPI.

What is the issue?

The government is considering a proposal to levy a Merchant Discount Rate (MDR) on UPI payments made to merchants for amounts exceeding ₹2,000. According to reports, this fee could range between 0.25% and 0.40%. However, this would apply only to business transactions; peer-to-peer (P2P) UPI transactions are likely to remain free, just as they are now.

What did the RBI Governor say?

RBI Governor Sanjay Malhotra noted that there are costs involved in operating, securing, and continuously improving the UPI network. Consequently, the system cannot remain completely free, as the costs must be covered by someone. He implied that a sustainable mechanism is essential to ensure the long-term viability of the digital payment system.

Is there any cause for concern?

For now, there is no need for ordinary UPI users to worry. No decision has been made to charge the public for UPI payments. The proposed MDR might be limited to specific transactions exceeding ₹2,000 made to merchants. This means that small, everyday payments and peer-to-peer transfers could continue to be free.