The Finance Ministry on Monday clarified that there is no plan to impose charges on Unified Payments Interface (UPI) transactions, quashing speculation that India's most popular digital payment system may cease to be free for individuals.
"Presently, there is no such proposal to impose transaction charges on UPI," Minister of State for Finance Pankaj Chaudhary said in a written reply in the Lok Sabha. The clarification comes days after comments by RBI Governor Sanjay Malhotra had reignited concerns about possible transaction fees.
RBI Governor's Remarks Sparked Debate
Speaking at the Financial Express BFSI Summit in Mumbai on July 25, Malhotra had said that UPI being free had "borne good fruits" but stressed that for any service to be sustainable, its costs must be met. While his comments led to speculation of possible user charges, the Governor later clarified on August 6 that he had never suggested users would be required to pay.
"My sense is that it is not free even now. Someone is paying for it. The government is subsidising it. But I never said that the users will have to pay," Malhotra explained at a post-monetary policy press conference.
Subsidies and Incentive Scheme
Since January 2020, no Merchant Discount Rate (MDR) has been levied on RuPay debit cards or UPI payments, as part of the government's strategy to promote digital transactions. Instead, the government compensates small-value UPI transactions (up to Rs 2000) made to small merchants through the Incentive Scheme for Promotion of RuPay Debit Cards and BHIM-UPI (P2M).
Under this scheme, the government has paid out around ₹8,730 crore over the last four years, Chaudhary informed Parliament. The incentive is capped at 0.15% of transaction value, though it does not cover large merchants.
Rising UPI Adoption
UPI has emerged as the backbone of India's digital payments ecosystem. In July 2025 alone, UPI processed 19.47 billion transactions worth Rs 25.08 lakh crore, marking a 35% rise in volume and 22% increase in value compared to July 2024.
Banks Charging Aggregators
While UPI remains free for individuals, some banks have started charging payment aggregators a nominal fee. Reports suggest ICICI Bank began levying 0.02-0.04% per transaction (up to Rs 6-10) from August 1, 2025. YES Bank and Axis Bank are also said to have introduced similar charges on aggregators such as Razorpay, PayU, and Pine Labs.
Conclusion
By ruling out UPI transaction fees for individuals, the finance ministry has reaffirmed its commitment to digital inclusion and low-cost payments. However, with the volume of transactions growing at record levels, the debate over who should ultimately bear the cost of sustaining the system is likely to continue.
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