'UPI Can’t Run Free Forever': RBI Governor Flags Need For Sustainable Payment System

Reserve Bank of India has underlined need to make the Unified Payments Interface more financially sustainable, signalling that the era of completely free digital transactions may not last forever.

Speaking at a media event, RBI Governor Sanjay Malhotra said while 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.

“Payments and money are a lifeline,” 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.”

Malhotra made it clear that while India remains committed to ensuring that digital payments are efficient, secure, and accessible, the sustainability of the infrastructure cannot be ignored. “Costs will have to be paid. Someone will have to bear the cost,” he said.

The RBI governor’s comments come at a time when UPI has seen explosive growth. In just two years, daily UPI transactions have doubled from 31 crore to over 60 crore per day.

This unprecedented scale has added pressure on the backend infrastructure, much of which is maintained by banks, payment service providers, and the National Payments Corporation of India. With no revenue stream from UPI transactions owing to a government-mandated zero merchant discount rate policy, industry players have repeatedly flagged the model as financially unsustainable.

“Any important infrastructure must bear fruits,” Malhotra said, while acknowledging the government’s decision to keep UPI free for now. But he cautioned that for any service to be truly sustainable, “its cost should be paid whether collectively or by the user.

The RBI Governor also confirmed that a lending rate cut is possible, but clarified that the central bank’s current neutral stance gives it the flexibility to move rates either up or down based on evolving economic data, especially the inflation and growth outlook.

“We have the flexibility to move up, down, or pause,” Malhotra said. “The stance of neutral allows us that flexibility… A rate cut is not ruled out.”

He further underlined that monetary policy is forward-looking, and current inflation numbers, while benign are less important than the trajectory over the next 6 to 12 months.

India’s inflation currently sits at 2.1%, well below the RBI’s upper threshold of 6%, but Malhotra cautioned that Jan-Mar projections still peg inflation at 4.4%, and potential revisions will guide future policy decisions.

Amid sluggish private investment and modest credit growth, the central bank believes its rate cuts and cash reserve ratio reduction have begun to transmit effectively into lower lending rates, aiding credit pick-up.

“In just two months, the 50 bps rate cut has been fully transmitted to new loans,” Malhotra said, adding that credit growth, though slower than last year, remains higher than the 10-year average.

Malhotra pushed back against the view that the RBI had “played all its cards,” saying the central bank retains sufficient tools in its monetary policy arsenal.

On globally uncertain environment including the US tariffs and financial market volatility, he said that the RBI is emphasising forward-looking, calibrated policymaking aimed at reducing uncertainty.

He also said that India’s stance on digital currencies remains cautious, even as the US passed the Genius Act, which is seen as a pushback against Central Bank Digital Currencies. A committee with RBI representation is currently examining the implications.