Mumbai, Aug 21: India’s Unified Payments Interface (UPI) has transformed the way people and businesses make payments. As the platform continues to handle massive transaction volumes, a new debate is emerging over how to keep the digital payment ecosystem financially sustainable without making everyday payments expensive for users.
Former Reserve Bank of India Executive Director and former Bank of India Chairman G. Padmanabhan has supported the idea of introducing a limited Merchant Discount Rate (MDR) on selected high-value UPI transactions. He said a sustainable revenue model could help the industry fund continuous investments in technology, infrastructure and cybersecurity.
The proposal is not aimed at putting charges on routine payments made by ordinary users. Small-value transactions and person-to-person transfers are expected to remain free. Any potential MDR would focus on selected high-value merchant transactions.
Padmanabhan said a carefully designed MDR system could improve transparency while giving banks, payment companies and technology providers a stronger financial base to maintain and upgrade the infrastructure supporting UPI.
UPI has grown rapidly and has become an important part of India’s digital economy. According to the Ministry of Finance, UPI processed around 2,366 crore transactions worth nearly ₹29.9 lakh crore in July 2026. The payment platform has also expanded internationally and is now available in 11 countries.
However, such rapid growth also brings higher costs. Payment companies and banks need to continuously improve their technology, strengthen fraud detection and protect users against increasingly sophisticated cyber threats. Maintaining a fast and reliable payment network requires regular investment.
The debate over MDR is therefore about more than introducing a new payment charge. It is about finding a long-term funding model for an infrastructure that has become essential to everyday commerce.
For small businesses and consumers, keeping low-value transactions free will be particularly important. UPI has helped street vendors, small retailers and local businesses accept digital payments easily, reducing their dependence on cash.
A limited charge on high-value commercial transactions could allow larger transactions to contribute towards the cost of maintaining the wider payment network. Any such system would need to be transparent, with clear information about when charges apply and who pays them.
The exact MDR rate and transaction threshold have not yet been finalised. The main challenge will be to balance affordability with the need for continued investment in security, technology and innovation.
A financially stronger UPI ecosystem could also support wider digital payment adoption in rural and semi-urban areas. Better payment infrastructure can help small businesses accept digital payments, improve access to formal financial services and encourage greater participation in the digital economy.
For millions of users, the priority is simple. UPI should remain easy, affordable and secure. For the industry, the challenge is to create a sustainable financial model that can support the next generation of India’s digital payment growth.
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