According to The finance ministry, the government is not planning to charge for payments through the unified payments interface (UPI) channel, putting to rest speculation following a recent Reserve Bank of India (RBI) discussion paper on digital payment charges.

UPI is a digital public good with immense convenience for the public and productivity gains for the economy. There is no consideration in government to levy any charges for UPI services. The concerns of the service providers for cost recovery have to be met through other means.

The government 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 such payments and promotion of economic and user-friendly payment platforms.

In January 2020, the Centre withdrew the merchant discount rate (MDR) on UPI and home-grown Rupay debit card transactions, leading to exponential growth in payments through UPI.

MDR is the charge paid by a merchant to the bank, card network and point-of-sale provider for offline transactions and to the payment gateways for online purchases.

This has been a contentious issue, and the industry has repeatedly urged the government to review the decision, citing hurdles to innovation and inadequate funds to support and upgrade the requisite infrastructure.

Deliberating on whether the use of payment mechanisms should incur a cost for the user, according to the RBI discussion paper on 17 August that payment system operators are independent entities and have expenditure associated with the setup, signalling the likelihood of charges being brought back.

According to RBI, “In any economic activity, including payment systems, there does not seem to be any justification for a free service unless there is an element of public good and dedication of the infrastructure for the welfare of the nation.”