Mumbai: Digital transactions in India are growing at a record pace, with UPI becoming the backbone of everyday payments — from tea stalls and auto fares to utility bills and online shopping. Its simplicity and zero-cost model have driven massive adoption across urban and rural areas alike.
However, as the Union Budget 2026 approaches, a serious debate has emerged: can UPI continue to remain free forever?
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At present, UPI operates on a free model, but its sustainability is increasingly under question. Nearly 85% of India’s digital payment transactions now take place through UPI. In October alone, over 20 billion transactions were processed, with a total value of around ₹27 lakh crore, highlighting the country’s heavy dependence on the platform.
Reports also indicate that about 45% of merchant revenues are generated via UPI payments. At the same time, most UPI transactions are small in value — often below ₹100 — but extremely frequent, increasing operational pressure on banks and fintech firms.
According to industry estimates, around ₹2 is spent to process each UPI transaction. So far, banks and fintech companies have been absorbing these costs. The Government of India had earlier allocated ₹3,980 crore to support UPI transactions, but this support has been reduced to ₹497 crore in 2025–26.
Experts estimate that running the UPI ecosystem in the coming years will require ₹8,000–₹10,000 crore annually. This raises a critical question: who will bear this financial burden?
The RBI Governor has also acknowledged that UPI cannot remain free for a lifetime, and that someone must eventually pay for the infrastructure and services. Due to funding constraints, companies are finding it difficult to introduce new features and upgrades.
As a result, there is growing speculation that the Union Budget 2026 may bring clarity on UPI’s future pricing model. One option is continued government subsidies to protect small users and merchants. Another is the introduction of a limited Merchant Discount Rate (MDR) to make UPI financially self-sustaining.
The coming policy decision will shape the future of India’s digital payment ecosystem.
