UPI charges could reverse digital payments gains, push users back to cash, says ex-NITI VC Rajiv Kumar

New Delhi: Former NITI Aayog vice-chairman Rajiv Kumar has urged the government to retain zero-fee UPI transactions for at least a few more years, warning that even a small charge could push users back towards cash.

Kumar told PTI that the government should not impose fees on merchants for UPI transactions of any value. He said UPI should be treated as a public good because its wider benefits outweigh the cost of maintaining its infrastructure.

“Their overall benefits well far outweigh the cost of Rs 20,000 crore that the public exchequer has to bear for maintaining the UPI infrastructure,” Kumar said.


He added, “...so let's continue with zero-fee UPI transactions for at least a few more years until the currency-to-GDP ratio shows some tendency to decline.”

Kumar said 96% of UPI transactions by volume are below Rs 2,000, while nearly 66% of transactions by value are above that level.

“This presents a very significant opportunity for transactions to shift back to cash; charging the smallest of fees will incentivise the regressive behaviour,” he said.

“...for now, best to continue with status quo for keeping a good thing going,” Kumar added.

Government announces UPI fee from October 15

The government on September 15 announced a 0.4% Merchant Discount Rate (MDR) on person-to-merchant UPI transactions above Rs 2,000. The fee will come into effect from October 15 and will be capped at Rs 300 for transactions worth Rs 75,000 or more.

The government said customers would not have to pay any charge for making UPI payments. Person-to-person transactions and small-value payments will remain free.

“Customers will not be required to pay any charge when making such payments through UPI,” the finance ministry said.

It added that MDR is a charge within the merchant payment ecosystem and “is not a charge on customers making UPI payments.”

Individuals will also continue to have unlimited free usage, with no monthly quotas, volume restrictions or tiered caps.

Opposition criticises move

The announcement drew criticism from opposition parties. Congress leader Rahul Gandhi alleged that the levy was “once again surrender” by Prime Minister Narendra Modi to American pressure.

The BJP rejected the criticism and accused the Congress of spreading “fake news”, saying the government had clearly stated that consumers would not be charged.

Essential and thin-margin sectors, including railways, telecom, insurance, fuel and agricultural inputs, will pay a flat MDR of Rs 5 per transaction above Rs 2,000.

The government said the measure would keep costs predictable for critical services. These sectors account for nearly 17% of P2M transaction volume and roughly 46% of P2M transactions.