Potential Charges on UPI Transactions
The government is contemplating allowing banks and payment processors to levy charges on UPI transactions, sparking several policy debates. Although a formal decision is yet to be announced, preparation steps have been taken.
Amendment to Payment and Settlements Systems Act
- The amendment was introduced through the Taxation and Other Laws (Amendment) Bill, 2026.
- It enables the government to specify which transactions can incur charges.
- Previously, UPI and RuPay debit card transactions were exempt from charges.
Scope of Charges
- Charges could apply to large merchants with turnovers exceeding ₹1 crore-₹1.5 crore.
- Transactions above ₹2,000 could also be charged.
- This would affect only about 5% of UPI transactions.
- There is a concern that merchants might transfer these costs to consumers, potentially increasing cash usage.
Payment Ecosystem Perspective
- UPI has been free since 2020, with payment players bearing operational costs.
- RBI Governor Sanjay Malhotra highlighted the need for someone to bear these costs.
- Taxpayers currently subsidize these costs through government schemes.
- The government has already spent ₹11,349 crore and budgeted another ₹2,000 crore for 2026-27 to subsidize transactions below ₹2,000.
Public Concerns
- There is apprehension about additional charges when taxes already support the system.
- Public sentiment is influenced by the view that UPI was promoted during demonetization, only to potentially become chargeable now.
Policy Arguments
- Finance Minister Nirmala Sitharaman suggests charges could boost infrastructure, innovation, and security investments by payment players.
- The RBI could fund UPI development, reducing the annual surplus transferred to the government but potentially avoiding an unpopular decision.
