India’s parliamentary finance committee has called for a phased, tiered merchant discount rate on high-value digital payments to ensure the long-term financial sustainability of the country’s rapidly expanding UPI system, balancing consumer affordability with ecosystem viability.
India panel urges tiered UPI fee model to fund payments network
India’s parliamentary finance committee has called for a phased merchant discount rate on high-value digital payments, saying the country’s fast-growing payments system needs a clearer revenue model to remain financially sustainable. According to reports from multiple Indian business publications, the panel argued that the current zero-fee structure for Unified Payments Interface transactions is placing an increasing strain on public finances and on the wider payments infrastructure.
The committee’s proposal is understood to favour a tiered approach rather than a blanket charge. Under that model, small merchants would be protected from fees, while larger merchants or higher-value transactions could face modest charges. The aim, according to the reports, is to preserve the broad consumer appeal of UPI while creating a self-supporting structure for banks, payment companies and network operators that currently rely heavily on government incentives.
Industry commentators quoted in related coverage said the debate should focus less on whether UPI needs funding and more on how the costs are shared across the ecosystem. That argument reflects a broader concern that subsidies now cover only part of the actual operating expense, raising questions about how India will pay for maintenance, upgrades and expansion as digital payments continue to scale.
The recommendation marks a notable shift in the policy conversation around UPI, which has become central to India’s retail payments system. Any move to reintroduce fees would be closely watched by merchants, banks and fintech companies, particularly if lawmakers try to balance the need for sustainability with the political appeal of keeping small-value digital payments free for users.
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