CS Setty, SBI chairman, emphasises that the rising costs of UPI transactions cannot be isolated due to shared infrastructure, as India’s digital payment system reaches new heights and sparks discussions on merchant charges.
State Bank of India chairman CS Setty has said banks cannot neatly separate the extra costs created by the surge in Unified Payments Interface traffic, arguing that much of the technology involved is shared across the system. Speaking on Friday, Setty said the pressure on bank systems from UPI could not be isolated as a stand-alone expense because the underlying infrastructure is used for multiple payment flows. He also said the lender’s own payments app still trails far behind the market leaders, despite some recent progress.
Setty’s remarks come as the government considers legal changes that could allow merchant charges on some UPI transactions, particularly payments above Rs 2,000, in order to help fund infrastructure and customer acquisition. According to the chairman, the key question is not whether such an option exists in principle, but whether the government chooses to use it. Industry executives, meanwhile, have been increasingly vocal that instant payments are not cost-free, pointing to higher spending on core banking systems, network operations, security upgrades and customer alerts.
The scale of UPI now helps explain why the cost debate is becoming sharper. Government and industry data show the platform had 55.49 crore users by June 2026, with transaction volumes in financial year 2025-26 reaching 24,161.69 crore and a total value of ₹314.23 lakh crore. In June alone, UPI handled about 22.72 billion transactions worth ₹28.92 lakh crore, underlining how deeply the system is embedded in everyday payments.
For SBI, the dependence on outside platforms is especially striking. According to NPCI data cited in the report, the bank recorded 631.6 crore UPI transactions in June 2026, but only 2.3 crore of those came through its own apps. Setty said SBI is trying to move more customers to its Yono app, yet it remains well behind Google Pay and PhonePe. Elsewhere in the ecosystem, biometric authentication is also gaining ground: Business Standard reported that more than 611 million UPI transactions in June were verified using fingerprints or facial recognition.
Fintech leaders are now openly shaping expectations around any future merchant fee. Amrish Rau, chief executive of Pine Labs, said Parliament has moved to amend the Payment & Settlement Act to enable some form of merchant discount rate while keeping consumer payments free. He pointed to Brazil’s PIX and China’s real-time payment systems as examples where merchant charges coexist with very high adoption. Mehul Mistry of Zeta said he expected any UPI merchant discount rate to be modest and aimed mainly at large merchants.
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