UPI: Why levy toll on India’s digital highway?

The Taxation and Other Laws (Amendment) Bill, 2026, an important part of the Finance Bill relating to the Union Budget for 2026-27, was introduced on August 4 and passed by the Lok Sabha on August 6. There was no debate or discussion on the Bill amid the continuing deadlock in Parliament.

Among its consequential provisions is an amendment to the Payment and Settlement Systems Act, 2007, particularly Section 10A. Congress leader Jairam Ramesh, in an Instagram post, argued that the amendment could burden the common man by paving the way for charges on routine Unified Payments Interface (UPI) transactions. Finance Minister Nirmala Sitharaman, however, clarified that even if a levy is imposed, it would be intended only for large-value transactions and would not burden ordinary users.

UPI is an outstanding Indian achievement. It has enabled people who have never seen a cheque, and who may not be comfortable filling out written payment instruments or vouchers, to make payments with a mobile phone and a QR code. The International Monetary Fund has recognised UPI as the world’s largest retail fast-payment system, accounting for nearly 49% of global real-time payment transactions.

The triad of “zero-touch, zero-cost and zero-time” has made UPI hugely popular. In recent months, it has facilitated roughly 75 crore transactions a day, involving around ₹1 lakh crore daily.

UPI, owned by the National Payments Corporation of India (NPCI), promoted by banks and the Reserve Bank of India, has also enabled/initiated the process for tie-ups with similar payment systems in Singapore, Malaysia and Indonesia. NPCI has floated a separate company for international operations, which is now being explored by countries such as Namibia, Ghana and Peru. UPI is an enviable example of open-source digital public infrastructure, with considerable potential for deployment across the Global South.

Even China, ahead of India on many fronts, has dominant digital payment systems such as Alipay and WeChat Pay, which are privately owned, not public infrastructure.

UPI, therefore, is perhaps India’s most impressive digital innovation. The brains behind its evolution included Nandan Nilekani, Dilip Asbe, AP Hota and Pramod Varma, with Dr Raghuram Rajan, as RBI Governor, providing important regulatory support. The Union Government also showed pragmatism in leveraging Aadhaar and UPI and working with Nilekani (Congress candidate in Bengaluru in 2014) though the ruling party had roundly criticised Aadhaar at that time.

UPI has also altered the competitive landscape for global payment giants such as Visa and Mastercard in India. Google Pay and PhonePe, both American companies, provide access to UPI without directly charging users, deriving value instead from the enormous scale of their platforms.

Let's now turn to the issue of levying charges for UPI transactions, which is totally free as of now. The financial strength of NPCI is particularly relevant to the debate on charging for UPI. Its audited financials are below for the last 3 years:

NPCI’s greatest economic contribution, however, may not be the revenue or surplus it earns. It is the competition it has created by ensuring that India’s payment infrastructure does not become a private toll road controlled by the Visas and Mastercards of the world.

Of course, the GOI has provided budgetary support for the UPI incentive scheme, including ₹2,210 crore in FY2022-23, ₹3,631 crore in FY2023-24 and ₹1,046 crore in FY2024-25 as payments, to banks supporting merchant and payment infrastructure, not to the NPCI.

Given NPCI’s existing business model — it also operates the National ATM switch for which issuing banks pay NPCI — there appears to be little immediate financial justification for imposing a charge on ordinary UPI transactions. The national objective should instead be to bring 80-90% of payment users onto UPI, by filling the gaps in usage. There are still crores of rural Indians, including small farmers, who do not own smartphones and remain outside the UPI architecture.

The key question, therefore, is whether India wants to preserve zero-cost UPI as a piece of digital public infrastructure till saturation or universalisation is reached. The answer should be yes. NPCI need not extract a few paise from every UPI transaction to remain financially viable. It can monetise the commercial layers of the payment ecosystem while keeping the basic UPI rail free for a few more years.

If NPCI is generating a surplus of roughly 40% of its total income after fully accounting for its expenses, including depreciation, the immediate financial case for imposing charges on ordinary UPI transactions appears weak.

India need not choose between a financially sustainable payment infrastructure and free UPI. NPCI’s existing model demonstrates that the two can coexist. Let us preserve the status quo for at least another five years and allow this unique piece of digital infrastructure to embed itself even more deeply in Indian life.

It may be worth foregoing a few paise per transaction today if that ensures UPI becomes the default payment system for virtually every Indian tomorrow.