Reserve Bank of India (RBI) Governor Sanjay Malhotra on Thursday reiterated that while the Unified Payments Interface (UPI) continues to be a no-cost service for end users, the operational costs behind the system are real—and someone is already paying for them.
Speaking at the post-policy press conference after the Monetary Policy Committee (MPC) meeting, Malhotra addressed growing concerns over the sustainability of the UPI model, especially in light of recent developments where banks like ICICI Bank have started charging fees for certain categories of UPI transactions routed through payment aggregators.
“I never said UPI cannot stay free forever,” Malhotra clarified, responding to questions about his recent remarks at an industry forum. “What I said was there are costs involved, and someone needs to pay them.”
While the government has so far maintained a subsidised model to promote digital payments, Malhotra pointed out that it’s not accurate to call UPI completely free. “My sense is that it is not free even now. The government is subsidising it, but somewhere, the costs are being paid,” he said.
Introduced in 2016 by the National Payments Corporation of India (NPCI), UPI has grown into the backbone of India’s digital payments landscape. It currently processes nearly 80% of the country’s retail digital transactions. In June 2025 alone, UPI handled 18.4 billion transactions, representing a 32% year-on-year jump, according to NPCI data.
Since January 2020, UPI transactions have been exempt from the Merchant Discount Rate (MDR), a fee that banks typically charge merchants for processing digital payments. This government-backed exemption played a key role in mass adoption across urban and rural areas alike.
However, the governor cautioned that the infrastructure behind UPI—servers, security systems, compliance mechanisms, and transaction processing—entails ongoing expenses. “The question of who pays is important but not as important as the fact that someone is paying. The sustainability of this model needs to be evaluated,” he said.
The statement comes amid ongoing discussions among regulators, banks, and industry stakeholders about the future of digital payment economics in India. While the government has not yet indicated any changes in policy, Malhotra’s remarks underscore growing pressure to review the financial model supporting the UPI ecosystem.
Malhotra acknowledged the success of UPI, calling it “an important infrastructure” and commending the government’s decision to keep it free so far. “It has borne good fruits,” he noted, referring to the surge in digital financial inclusion and ease of transactions.
