- By Aditya Pratap Singh
- Wed, 05 Aug 2026 03:43 PM (IST)
- Source:JND
- RBI Governor hints at underlying costs for UPI.
- The government bill may allow the Merchant Discount Rate (MDR).
- Banks and payment companies incur high infrastructure costs.
All the speculations claiming the UPI may not be free anymore became even stronger after RBI Governor Sanjay Malhotra's remark post the MPC press conference. He was asked if there will be charges on UPI transactions. Responding to this, he said that the matter is very premature to talk about as the government brings the amendment. However, he said that the costs have to be paid by someone.
We all want the continuation and strengthening of this public infrastructure, he told reporters. The governor's statement came amid reports that sparked speculations of levying a Merchant Discount Rate (or MDR) on UPI transactions.
The governor highlighted that the cost to run the online payment infrastructure is already getting passed on, however, it may not be directly onto the very user, but someone is paying the cost.
"This is what I meant when I said someone will have to pay the cost," the governor said.
UPI Seems Free, But It Has A Cost
While UPI appears free to users, banks and payment companies incur high costs to maintain the infrastructure. Since January 2020, they have been prohibited from charging MDR to merchants, with the government providing subsidies instead. However, as transaction volumes have grown rapidly, these subsidies no longer fully cover the operational expenses involved.
Govt Tables New Bill
The Finance Ministry introduced a bill in the Lok Sabha to amend tax regulations, which proposes amendments to the Payment and Settlement Systems Act 2007. The legislation could pave the way for imposing an MDR.
Also Read: RBI MPC: Central Bank Raises FY27 GDP Growth Forecast To 6.7%, Lowers Inflation Projection To 5%
Currently, under the Payment and Settlement Systems Act of 2007, no bank or other service provider can charge any fee for UPI payments.
According to Finance Ministry sources, cited by Jagran.com, the National Payments Corporation of India (NPCI), the regulatory agency for UPI operations, will issue detailed guidelines in this regard.