UPI transactions will remain free, government says it has no plan to charge them

• The Finance Ministry has said that the government does not plan on levying charges on UPI transactions.
• A discussion paper by the RBI suggested a tiered charge for UPI transactions.
• The ministry has said that the government will continue to support the digital payment ecosystem.

The Unified Payments Interface (UPI) is one of the biggest achievements of the Digital India initiative and has made payments easier. One reason that UPI was so successful is that the users were not charged anything to send and receive money.

The Reserve Bank of India (RBI) recently released a consultation paper on charges in payment systems. One of the suggestions in this paper was that a tiered charge could be imposed on UPI transactions in line with Immediate Payment Service (IMPS) transactions.

“UPI as a funds transfer system is like IMPS. 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,” the RBI said in its paper.

The government has now clarified that it does not plan to impose any charges on UPI.

“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 Finance Ministry said in a tweet.

The ministry also said that the cost incurred by the service providers would have to be recovered through other means. “The concerns of the service providers for cost recovery have to be met through other means," the ministry added.

“The Govt 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 and promotion of payment platforms that are economical and user-friendly,” the ministry added.

The government must continue to keep UPI transactions free as it continues to grow. To understand the importance of UPI, we need to look at the transaction numbers.

India recorded over 200 million UPI transactions per day in July 2022

In July 2022, over 200 million transactions were done daily using UPI, resulting in a total of 6.28 billion transactions. The total value of transactions in July 2022 alone was ₹10.62 lakh crore.

Another area where UPI has become important is international travel. Indians can use UPI in countries like UAE, France, Singapore, Bhutan and Nepal, making payments easier when they travel.

In addition, the government also announced its plan to allow credit cards to be linked to UPI, allowing users to use UPI to make payments with their credit cards. This will give a big boost to b credit cards and UPI.

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