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The Finance Ministry has outright rejected the demand for levying fees on UPI payments, which has been raised over the past year by banks and payment service providers (Paytm, PhonePe, etc.), raising the issue of UPI costs.

The government's intention is clear that UPI will remain free for general users and small merchants. To this end, the Union Budget 2026-27 has provided a subsidy of ₹2,000 crore for UPI and RuPay debit card transactions to ensure the continuation of the Merchant Discount Rate (MDR) model.

Under MDR, the government compensates banks for a significant portion of their financial burden related to digital payments. The previous budget allocated ₹437 crore for this amount, but it has since been increased to ₹2,196 crore. The government has also shelved the proposal to impose additional fees on large-value payments made through UPI.

However, this government stance has disappointed banks and fintech companies, which play a key role in the success of digital payments and payment gateways. UPI currently processes over 300 million transactions daily, and this amount is considered insufficient for scaling, fraud prevention, and infrastructure expansion.

Banks and fintech companies say that they incur an average cost of two rupees per digital payment, and the current system is not covering this cost. Furthermore, their costs are increasing due to the development of the necessary infrastructure for digital payments, the prevention of increasing fraud, the addition of new features, and the expansion of this facility to remote areas.

RBI data shows that 86 percent of transactions are for less than ₹500, which increases costs.

There was a demand to bring large merchants under the ambit of the fee.
The Payments Council of India, an organization of related companies, had been demanding a fee be imposed on large merchants (with turnover over ₹10 crore). A presentation was also made to a committee constituted by the RBI regarding this matter. An additional fee of 0.2-0.3 percent was demanded from large merchants accepting digital payments.

They also stated that small payments and personal transactions should remain fee-free. They also stated the inability to continue the current system for long. However, the government has clearly indicated that it will not impose any fees on users. Finance Ministry and RBI officials say that if necessary, the issue of increasing UPI fees will be discussed again in a few months.

UPI recorded a record 2,170 crore transactions in January
The popularity and transaction speed of the Unified Payments Interface (UPI) in India have reached record levels and are expected to accelerate further. In January 2026, UPI recorded a record 2,170 crore transactions, with a total value of ₹28.33 lakh crore. This is slightly higher than the 2163 crore transactions and ₹27.97 lakh crore value in December 2025. Thus, on average, 70 crore financial transactions (₹91,403 crore) are taking place daily.

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