Let UPI stay as it is

India’s UPI revolution is, arguably, unparalleled anywhere in the world. Though it was launched in 2016, it got the biggest boost during the COVID days when traders even in small towns and villages adopted it. Between 2021–22 and 2025–26, the UPI volume grew by an astronomical 425%. Last financial year, it processed 24,161.69 crore transactions with a total transaction value of ?314 lakh crore, while last month alone, UPI logged a record 2,360 crore transactions valued at ?29.9 lakh crore.

The best part is that UPI facilitates a virtual cash transaction — the money travels directly from the sender’s bank account to the receiver’s account without any intermediary fee. Will this change? That’s what everyone is talking about after the gov ernment got the Taxation and Other Laws (Amend ment) Bill, 2026 (which amended Section 10A of the Payment and Settlement Systems Act, 2007) passed in the Lok Sabha on August 7. The bill allows the gov ernment to levy a fee called the Merchant Discount Rate on merchants when a consumer pays for a purchase via UPI.

Reserve Bank of India Governor San jay Malhotra said UPI wasn’t actually free and “someone is paying” to keep the massive infrastructure running. He was referring to the banks, fintech companies, and the government, which bear the cost — estimated by various industry experts at around ?15,000 crore annually. The subtle hint behind the bill is that some cost has to be borne by the beneficiaries as well. Be that as it may, media analysis has shown that the RBI’s annual surplus transfers to the Union government skyrocketed from ?30,307.45 crore in 2021 22 to a staggering ?2.9 lakh crore in 2025–26; that’s an increase of 857%.

The entire operating cost of the UPI platform represents 5% of the RBI’s annual surplus transfer. This means the RBI has more than enough money to keep the UPI machine running. While it’s understandable that running UPI securely and smoothly is expensive, the government shouldn’t look at the burgeoning platform as an easy monetisation zone. Following massive backlash online, the govern ment issued a clarification that there is no plan to levy a fee on inter-personal transactions, and that only merchants will have to pay.

But it is quite pos sible that merchants, especially the small ones, will pass on the burden to customers. If that happens UPI would be no different from credit cards and debit cards, effectively sounding the death knell for this revolutionary digital transformation. While there is no convincing reason to levy a fee on anyone, even if the government wants to tax mer chants, let that be restricted only to large businesses that can absorb the burden without passing it on to the customers.