RBI Governor Sanjay Malhotra makes BIG statement on free UPI transactions, says 'some cost...'

RBI Governor Sanjay Malhotra has made a big statement on the Unified Payments Interface on Friday. In a recent media event, Mr. Malhotra said that UPI interface should be made financially sustainable in the future as 'payments and money are lifeline', signaling that the era of completely free digital transactions via the Unified Payments Interface (UPI) may not last forever.

No charges on UPI  

He said that the UPI system is currently free for users, with the government covering costs by subsidising banks and other stakeholders, 'We need a universally efficient system. As of now, there are no charges. The government is subsidising various players such as banks and other stakeholders in the UPI payments system.'

Free UPI is not forever

RBI governor said that, to sustain the infrastructure of digital payments, someone has to pay the cost and free of charge UPI transactions will not last forever. He said, 'Obviously, some costs have to be paid. Any important infrastructure must bear fruits.' He added, 'any service to be truly sustainable, its cost should be paid whether collectively or by the user.'

Rise of UPI puts burden on infrastructure

UPI transactions have seen an explosive growth over the years and has surpassed global payments giant Visa. India became the global leader in fast payments, as UPI processed over Rs 24.03 lakh crore in payments through 18.39 billion transactions in June. However, this growth puts a lot of pressure on the backend infrastructure, like banks, payment service providers, and the National Payments Corporation of India (NPCI). It is flagged as a financially unsustainable model due to no revenue stream from UPI transactions all because of government-mandated policy of zero merchant discount rates.