New Delhi: Levying charges on Unified Payments Interface (UPI) transactions could push India back to becoming a “cash economy” again, BharatPe co-founder Ashneer Grover warned on Tuesday.
Criticising the possibility of levying such charges, he said that it would effectively amount to tax collection. He also questioned the logic behind charging for a payment system that has helped drive India’s digital payments revolution, while speaking to CNN-News18.
Introducing charges on UPI could push consumers and merchants back towards cash, eventually increasing the cost of managing cash for banks and businesses, Grover said.
“Why are you interfering with something that is already working? Why do you have to interfere with everything? Free UPI is the only UPI. If you start charging for UPI, you can say ‘Tata, bye-bye’ to it. It is over,” he said.
His comments came after the government notified that banks and payment system providers cannot impose charges, directly or indirectly, on UPI transactions of up to Rs 2,000 or on payments made through RuPay debit cards.
The notification, however, does not explicitly clarify whether charges could be imposed on UPI transactions above Rs 2,000, particularly those made by merchants.
UPI transactions have not attracted a Merchant Discount Rate (MDR) so far, irrespective of the transaction value.
He questioned the significance of the Rs 2,000 threshold, arguing that transactions above the limit account for a relatively small share of transactions by volume but represent a much larger share of their overall value.
“What is the government saying? That transactions above Rs 2,000 account for only 4% of transactions by volume. But in terms of value, those transactions account for 66%. So they have simply found a nice, round number above which they can impose a tax and collect more money from people, over and above existing taxes. There is no logic to it,” Grover said.
Merchants could pass any potential MDR on to consumers or encourage them to make multiple smaller UPI payments, he warned.
“You are trying to justify why only 4% of transactions should be protected. But two-thirds of the value of UPI transactions is where you are going to impose MDR,” he said.
If merchants are eventually allowed to levy charges on larger UPI transactions, customers could be given the choice of either paying the additional fee or using cash, he pointed out.
“A shopkeeper could simply refuse to accept a UPI payment of Rs 2,000 and ask you to pay entirely in cash. Then you will go back to using cash. You will need more offices and more ATMs. The number of ATMs will increase, and the cost of operating those ATMs will also increase,” Grover said.
“Whatever you save, you will end up spending much more in the banking sector on managing cash, and India could become a cash economy again,” he added.
Consumers could split larger payments into multiple smaller transactions to avoid potential charges, he further said.
“If you have to pay Rs 12,000, you can keep making payments of Rs 6,000 or Rs 2,000, sitting there and doing it repeatedly. Or I can tell you that I will charge you whatever the government allows – 0.25%, 0.5% or 1% – and collect that amount from you. Otherwise, pay in cash,” Grover said.
“It’s a simple shop transaction. What’s so difficult about it? It’s not rocket science.”
Imposing charges on UPI could undermine one of India’s biggest digital-payment success stories, he pointed out.
Grover also highlighted the Reserve Bank of India’s surplus transferred to the government at Rs 2.87 lakh crore, total listed bank profits at Rs 4.11 lakh crore, and NPCI’s pre-tax surplus at Rs 1,888 crore.
“Then whose loss is happening because of UPI and what subsidy is the government giving on UPI that is hurting?” He asked.
The gazette notification of September 14 states that no bank or system provider can impose, either directly or indirectly, any charge on a person making or receiving a payment through RuPay debit cards or UPI transactions of up to Rs 2,000.
The notification follows an amendment to Section 10A of the Payment and Settlement Systems Act, 2007. The amendment creates an enabling framework for imposing MDR on UPI and other notified electronic payment modes.
The amendment Bill was passed by Parliament during the Monsoon Session, which concluded on August 13, 2026.
The government said the UPI and Services Steering Committee, headed by the National Payments Corporation of India (NPCI), would decide the MDR rates, after the passage of the Bill.
Pointing to the rapid growth in UPI transactions, the government has highlighted the need for continued investment in the payment ecosystem.
Exponential growth in transaction volumes requires significant and continuous upgrades in cybersecurity, fraud prevention and infrastructure, thw government said.
It further argued that charges are required to support market expansion and make the UPI ecosystem more self-sustaining. A revenue model, the government said, could encourage more companies to enter and expand in the digital payments sector, thereby increasing competition.
Relying solely on subsidies is not viable for the next phase of UPI’s growth and that a balanced framework is needed to keep the system robust, inclusive and future-ready, the government said.
UPI is operated by the National Payments Corporation of India (NPCI), an initiative of the Reserve Bank of India and the Indian Banks’ Association.
The real-time payments system allows users to transfer money directly between bank accounts and make payments to merchants.
UPI has also expanded internationally and is now accepted in 11 countries. Uzbekistan is the latest country to join the list.
The other countries where UPI is accepted include Singapore, the United Arab Emirates, France, Mauritius, Nepal, Bhutan, Qatar, Sri Lanka, Cambodia and Greece.
Launched on August 25, 2016, UPI has transformed India’s digital payments landscape. Its transaction value rose from Rs 0.07 lakh crore in FY17 to around Rs 314 lakh crore in FY26 – an increase of more than 4,000 times over the decade.
The debate over MDR now centres on how UPI can remain affordable for users while ensuring that the payment ecosystem has a sustainable revenue model to fund infrastructure, cybersecurity and innovation.
