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UPI Payments: There has been considerable discussion recently regarding a potential bill to levy charges on UPI payments. Amidst this, a report has emerged detailing the annual revenue generated through UPI payments.

UPI Payments: UPI payments have been a topic of intense discussion for quite some time, especially since talks about imposing charges began. Until now, making UPI payments in India has been free for most users. However, banks, payment companies, and other associated institutions incur significant annual costs to operate the UPI system. Now, following a government proposal, discussions have begun regarding the possibility of levying charges on UPI and RuPay debit card transactions in certain cases.

What is the cost of operating UPI?

According to an Indian Express report, operating UPI involves not just the mobile app but an entire digital payment ecosystem. This entails various costs, such as maintaining the app and its technology, customer service, transaction verification by banks, cybersecurity, KYC compliance, cloud storage, fraud prevention, dispute resolution, and continuous network monitoring.

Estimates suggest that operating the digital payment infrastructure for UPI and RuPay debit cards could cost at least ₹10,000 crore annually. Meanwhile, a report by the Parliamentary Standing Committee on Finance indicates that between 2021-22 and 2024-25, the government provided subsidies totaling approximately ₹8,730 crore to promote digital payments—amounting to only about 11% of the digital payment industry's total costs. Based on this, the total annual cost of the digital payment system is estimated to be around ₹20,000 crore. This implies a cost of approximately 83 paise per transaction.

What could the fees be?

An MDR (Merchant Discount Rate) ranging from 0.3% to 0.6% could be charged to large merchants for UPI payments. MDR is the fee that banks or payment companies charge merchants for processing payments. Some experts estimate the figure to be significantly lower; according to them, the MDR for UPI could range from 0.05% to 0.07%. It is suggested that this fee would primarily be levied on large merchants. For comparison, the MDR for credit cards typically ranges from 1% to 3%, while for debit cards, it is around 0.9%.

Why might charges be levied on UPI?

It is worth noting that Finance Minister Nirmala Sitharaman introduced the Taxation and Other Laws (Amendment) Bill, 2026, in Parliament on Tuesday. The bill proposes amendments to the Payment and Settlement Systems Act, 2007. Following these changes, banks and payment system providers could be permitted to charge fees on certain payments made via UPI and RuPay debit cards. However, this does not mean that a charge will apply to every UPI transaction.