Former RBI governor D. Subbarao highlights the need to introduce fees on UPI transactions to cover operational costs and foster innovation, amid ongoing debates and policy clarifications.
Former Reserve Bank of India governor D. Subbarao has renewed the debate over whether Unified Payments Interface transfers should remain free, arguing that the digital rail has real operating costs and that someone will ultimately have to pay them. Speaking at the launch of “Cashless Nation”, he said a system that is free at the point of use can still impose a burden on banks, which may recover that cost through lower deposit rates or pricier loans.
Subbarao accepted that any move to charge for UPI could push some informal and unorganised businesses back towards cash, but said leaving the service entirely costless could also dull incentives for banks to invest in innovation and upkeep. He suggested a phased approach, beginning with higher-value transactions before any broader rollout.
His comments come against a backdrop of repeated clarification from the Reserve Bank of India that no immediate decision has been taken on charging users for UPI. In August 2026, governor Sanjay Malhotra said it was too early to say whether any merchant discount rate, or MDR, would be imposed, while stressing that the cost of running the system has to be met by someone. In October 2025, he had also said there was no proposal to levy UPI charges, underscoring the gap between policy debate and formal action.
At the same event, Subbarao widened the discussion beyond pricing. He said UPI has reduced, but not erased, the gender gap in digital payments, noting that women hold about half of Jan Dhan accounts but make less than a quarter of UPI transactions. He argued that access alone is not enough, because many women still lack privacy, confidence or agency when using mobile payments. He also said the larger challenge is credit: financial inclusion, in his view, should mean access to formal lending, not just the ability to open an account or send money. He added that data, combined with artificial intelligence, could help lenders judge repayment capacity and willingness more accurately, especially for small businesses seeking investment finance.
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