RBI Flags UPI Sustainability Concerns

The Reserve Bank of India (RBI) has flagged that Unified Payments Interface’s financial sustainability will depend on changing the system of free digital transactions to include minimal charges.

As the UPI system currently operates without any charges for users, it is the government that has been footing the bill by subsidising banks and other stakeholders who enable the seamless, real-time payments infrastructure, RBI Governor Sanjay Malhotra said.

While addressing at a media event, Malhotra said, “We need a universally efficient system. As of now, there are no charges. The government is subsidising various players such as banks and other stakeholders in the UPI payments system. Obviously, some costs have to be paid.”

Even as the government has stuck with its decision to keep UPI free momentarily, Malhotra highlighted that, “Any important infrastructure must bear fruits.”

He added that for any service to be truly sustainable, “its cost should be paid whether collectively or by the user.”

Based on a survey from last year, a majority of nearly 73% users revealed that they are opposed to levying a transaction fee on UPI transactions and they would stop using the digital payment method if such a fee is imposed.

The development comes at a time when the government reaffirmed its commitment to promoting digital payments via UPI in June, rejecting reports that stated the possibility of levying a merchant discount rate (MDR) on UPI transactions above INR 3,000.

On that front, the National Payments Corporation of India’s (NPCI) mandated to reduce response time for UPI APIs initiated to as low as 10 seconds for certain transactions, a month ago.

Based on the NPCI data, UPI transactions saw a marginal dip to 18.40 Bn in June from an all-time high of 18.68 Bn in the previous month. However, on an annual basis, the transaction count jumped 32%.

Meanwhile, the average daily transaction count jumped to 613 Mn in June, from 602 Mn in May.