India Reassesses How to Fund Free UPI
Summary
India is reassessing how to pay for UPI, the instant payment system that is free for users but expensive to run. The article says Parliament’s recent amendment and a government review of funding options have revived the debate over whether merchant charges, subsidies or platform fees should support the network.
Compliance Impact
UPI and RuPay debit payments have operated under zero MDR since January 2020, so any move to restore charges would change the economics for merchants, banks and payment apps. The government has so far used incentive schemes to cover only part of the cost, and the latest scheme is narrower, aimed at low-value payments to small merchants.
Limits
Supporters of keeping UPI free argue that any merchant charge could push price-sensitive users and shops back toward cash, which also carries handling and security costs.
The sustainability case cuts the other way: industry estimates cited by a parliamentary committee put operating costs far above current government support, and the source does not show that app revenue fully covers the gap.