Will UPI transactions remain free? Govt of India has an answer

A few days ago there were multiple reports claiming that the Indian government will impose charges on UPI transactions in a bid to help UPI platforms recover heavy operational costs. While this didn’t sound like a good idea considering the adoption of UPI will slow down if any charges are levied, the government of India clarified that it is not considering any charges on UPI services. The Ministry of Finance further clarified that the concerns of the UPI service providers for cost recovery “would have to be met through other means.”

The ministry has further noted that UPI is a digital public good that is very convenient for the public and productivity gains for the economy. The Tweet says that the government had provided financial support for the ‘Digital Payment ecosystem’ last year and has announced the same this year as well to encourage further adoption of digital payments.

UPI is a digital public good with immense convenience for the public & productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means. (1/2)
— Ministry of Finance (@FinMinIndia) August 21, 2022

UPI payments will not be charged

The Ministry of Finance clarified that UPI payments will not be charged and that the service providers’ recovery cost would have to be met through other means. This comes after the Reserve Bank of India (RBI) sought public feedback on UPI payments and charges.

“UPI is a digital public good with immense convenience for the public & productivity gains for the economy. There is no consideration in Govt to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means. The Govt had provided financial support for the Digital Payment ecosystem last year and announced the same this year as well to encourage further adoption of DigitalPayments and promotion of payment platforms that are economical and user-friendly,” said the Ministry of Finance in a tweet.

RBI has not issued instructions regarding charges for UPI transactions. The government has mandated a zero-charge framework for UPI transactions with effect from January 1st, 2020. This means that charges in UPI are zero for users and merchants alike. “Keeping in view that the intent of this discussion paper is to elicit general feedback, a few questions on what approach should be adopted, have been included,” RBI said in its ‘Discussion Paper on Charges in payment Systems’.

UPI as a fund transfer system is like IMPS, the discussion paper said, “Therefore, it could be argued that the charges in UPI need to be similar to charges in IMPS for fund transfer transactions. A tiered charge could be imposed based on the different amount bands.“