UPI charges: The Reserve Bank of India wants UPI to grow even more, but it also wants people to understand that running UPI is not free. RBI Governor Sanjay Malhotra spoke about this during the press conference held after the Monetary Policy Committee meeting. He made it clear that while users don’t pay for UPI directly, the system still has costs.
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While answering a question about UPI charges like the merchant discount rate (MDR), he said, “I never said that UPI can stay free forever. What I said was there are costs (associated with UPI transactions), and they need to be paid for by someone.” He said that the important thing is not really who is paying, but the fact that someone is paying for the service.
According to ET, he added, “There are costs, and these costs have to be paid by someone. Who pays is important but not as important as the fact that someone is footing the bill.” He also said, “Who pays is important but not so important than someone footing the bill. So, it is important for us for the sustainability of the model, that whether collectively or individually someone pays.”
ICICI Bank First to Charge for UPI Processing
A report by ET Wealth Online shared that ICICI Bank has started charging a fee for UPI transactions that are handled through Payment Aggregators (PAs). This started from August 1, 2025. The bank did not give an official statement, but people familiar with the matter told ET that the bank had already told the PAs about this change in June.
As per the report, the bank is now charging PAs with an escrow account at ICICI Bank a small fee of 2 basis points, which means Rs 0.02 per Rs 100. This charge is capped at Rs 6 per transaction. If the PA does not have an escrow account at ICICI Bank, the charge goes up to 4 basis points, or Rs 0.04 per Rs 100, and it is capped at Rs 10 per transaction. But if the UPI payment is going through a merchant’s ICICI Bank account, then no fee will be charged.
In July, during the Financial Express BFSI Summit in Mumbai, Malhotra had already warned that the current free model of UPI might not last forever. At the summit, he said, “This (UPI) is an important infrastructure. The government has taken a view it should be available free and the government is subsidising it. And I would say it has borne good fruits.”
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He was talking about the growth in digital payments and how it’s been good for the country. RBI data shows that in June alone, people made 18.4 billion UPI transactions, which is 32% more than the same time last year.
He also said, “The important thing is that the UPI, or any other payment system for that matter, is accessible, cheap, secure, and sustainable… and it will be sustainable only if someone bears the costs. So as long as it’s the government or someone else — that’s not so important — the important thing is that costs of any service should be paid, whether collectively or by the user.” According to the RBI Governor, the government is paying the costs right now and banks or other companies are not directly paying for all these transactions.
