​Pay wall: On a charge on UPI transactions

The government’s decision to allow banks and payment processors to levy a charge on UPI transactions , while still pending, has already led to several policy questions. No official decision has yet been announced, but the preparations are apparent. The only official change that has been made is the amendment to the Payment and Settlements Systems Act that will now allow the government to notify which types of transactions can attract a charge. This was done through the Taxation and Other Laws (Amendment) Bill, 2026, which was passed in the Lok Sabha recently without a debate. Before this law, UPI and RuPay debit card transactions were expressly exempt from any charges. Government sources say that the charge could be allowed only for transactions conducted by large merchants with turnovers of more than ₹1 crore-₹1.5 crore and for transactions above ₹2,000 in value. This would limit the charge to only about 5% of all UPI transactions. However, the amended law gives the government the ability to widen this scope. The fear also is that merchants will pass this cost on to consumers, who will move back to cash, which remains free to use. That said, the issue must also be looked at from the point of view of the payment ecosystem. UPI was made free in 2020. The payments players have argued that they have been bearing the cost of maintaining and running UPI since then. As Reserve Bank of India (RBI) Governor Sanjay Malhotra recently said, “somebody has to pay” for UPI. Presumably, he meant that “somebody” should no longer be the payment processors or banks.