News | RBI Governor Signals Possible Shift from Zero‑Fee UPI Model Amid Surge in Payments

RBI Governor Signals Possible Shift from Zero‑Fee UPI Model Amid Surge in Payments

News

26 July 2025

2 min read

UBS Forums

3585

Reserve Bank of India Governor Sanjay Malhotra has flagged urgent concerns about the long‑term financial viability of UPI, urging policymakers to rethink its existing zero‑fee model amid ballooning transaction volumes. Addressing the Financial Express BFSI Summit, he highlighted that daily UPI transactions have doubled in just two years, soaring from roughly 31 crores to over 60 crores, and warned that the government can no longer indefinitely subsidize operational and infrastructure costs.

Malhotra acknowledged the success of the free‑transactions policy, stating that universal access and mass adoption "has borne good fruits". However, he emphasized that "some costs have to be paid", whether by the state, merchants, or eventual users, to maintain a sustainable, secure, and scalable payment infrastructure. While the question of reintroducing the Merchant Discount Rate (MDR) on high‑value or merchant transactions remains politically sensitive, he noted that the ultimate responsibility to continue the zero‑MDR regime rests with the government, which has so far resisted reinstating charges to preserve UPI as a “digital public good”.

In setting the broader context, Malhotra also stressed the need for forward‑looking policy frameworks—not just for payments but also in monetary policy and banking regulations—as India prepares for future challenges from cybersecurity to payment system resilience.