The Reserve Bank of India's Governor Sanjay Malhotra has indicated that India's digital payment system Unified Payments Interface (UPI) may not remain completely free for users indefinitely.

 

Malhotra highlighted concerns about the financial sustainability of the UPI as transaction volumes continue to surge, he said at a Financial Express event.

India processed 18.4 billion UPI transactions worth Rs 24.04 lakh crore in June, according to data from the National Payments Corp of India (NPCI), which operate the UPI. Despite a slight drop from May, its usage remains popular among people.

Currently, UPI operates without charging users any fees, but this comes at a significant cost that the government absorbs by providing subsidies to banks and other financial institutions participating in the ecosystem. 

Malhotra emphasized that while digital payments serve as a crucial economic lifeline requiring universal efficiency, the underlying expenses must eventually be addressed. 

The RBI Governor's comments reflect the challenges posed by UPI's remarkable growth trajectory.

Malhotra stressed that India remains dedicated to maintaining accessible and secure digital payment infrastructure, but acknowledged that the question of who bears the operational costs cannot be ignored indefinitely. He clarified that decisions regarding the continuation of the current zero merchant discount rate policy rest with the government rather than the central bank.

It's not just the domestic market, on the international front UPI is already active in countries such as Bhutan, Nepal, Mauritius, Sri Lanka, Singapore, France, Oman and the UAE.

Recently, PayPal struck a series of global partnership with the NPCI to launch a new cross-border payments platform called PayPal World, which could potentially expand the usage of UPI.