UPI costs Rs 20,700 crore, government allocation just Rs 2,000 crore: Parliament Panel

New Delhi: A parliamentary standing committee has recommended that the government should explore a self-reliant, tiered revenue model to ensure that the Unified Payment Interface or UPI ecosystem achieves financial sustainability without perpetually straining the government exchequer.

The parliament has passed amendments to the Payment and Settlement Systems (PSS) Act, 2007, which will allow the Centre to permit banks and other service providers to levy charges on transactions made through UPI and other notified digital payment modes.

Also Read: Most UPI transactions to stay free: FM Nirmala Sitharaman


The parliamentary standing committee on finance headed by Bhartruhari Mahtab noted that while UPI is expected to process up to 150 billion transactions per month and add 600 million new users, the current government incentive covers merely 11% of the industry’s actual costs and 14% of potential MDR collections, creating a structural funding gap impacting long-term infrastructural investment.


The Committee stated that it remains deeply concerned by the staggering mismatch between the Rs 2,000 crore allocation and the industry's estimated operational cost of Rs 20,700 crore and while statutory enablement now exists to permit calibrated MDR on high-value transactions, "any delay in notifying and operationalizing this framework leaves payment service providers heavily dependent on inadequate subsidies, thereby threatening critical investments in cybersecurity, fraud prevention, and network infrastructure."

Separately, the commitee also recommended that the Department of Financial Services and RBI should deploy an automated 24/7 API interface between reporting portals and Core Banking Systems for Golden-Hour fund recovery, accompanied by mandatory transaction safeguards and strict branch-level accountability for KYC lapses.

Also Read: UPI MDR may return, but only some merchants will have to pay, Finance Ministry clarifies

Last week, the finance ministry in a statement noted that any future merchant discount rate (MDR) charges on transactions through the Unified Payment Interface, or UPI, will be nominal and apply only to a limited set of merchant transactions. A vast majority of merchant transactions, too, will not attract any fees, it said.

"As and when MDR charges are introduced, they will apply only to a limited set of merchant transactions, above a certain threshold, at a nominal rate, far lower than debit or credit card MDRs," the Finance Ministry said in a statement.

Consumers making payments will not face any transaction charges, the ministry said.

It further noted that "MDR, if introduced, will only be threshold based and not blanketly levied to all."