RBI Governor Sanjay Malhotra says it is premature to charge merchant fees on UPI transactions, as the central bank prioritizes scaling the network to 800 million daily payments. While the government has proposed legislative changes to allow flexibility for fees, the current focus remains on building infrastructure rather than immediate monetization.
Reserve Bank of India Governor Sanjay Malhotra has clarified that introducing merchant fees for Unified Payments Interface (UPI) transactions is not currently on the agenda. Speaking to the media, the Governor described any move to levy charges on UPI as premature, emphasizing that the central bank’s primary goal is to maintain the system's growth and achieve the target of 800 million daily transactions.
This statement comes amid ongoing discussions regarding the Taxation and Other Laws (Amendment) Bill, 2026. This proposed legislation aims to amend the Payment and Settlement Systems Act of 2007. If passed, these amendments would give the government and regulators the flexibility to introduce merchant charges on high-value digital transactions, specifically those exceeding ₹2,000, in the future. Currently, no final framework or specific fee structure has been determined.
The Governor highlighted that while UPI payments are free for users, the ecosystem costs are not zero. He noted that these costs are currently being absorbed by the broader economy in various ways. For everyday users and merchants, this means that while they do not pay a direct fee for each transaction, the expenses related to maintaining the massive digital infrastructure are already present within the system.
Currently, the UPI ecosystem operates on a model where large platforms—such as PhonePe and Google Pay—offer services to users for free to drive customer acquisition. These companies then monetize their platforms by cross-selling other financial products to the massive user base they have built. The uncertainty regarding potential future fees creates a complex environment for these payment providers, as they rely on this scale to sustain their business models.
For the financial sector, the key monitorable remains how the government balances the need for a sustainable revenue model with the priority of keeping digital payments accessible. As the system scales toward the goal of 800 million transactions per day, the debate over whether merchants should pay a small fee for high-value transactions—and how that would impact the rapid adoption of digital payments—will likely continue to be a significant topic in the coming months.