Amidst legislative changes allowing charges on UPI transactions, a leading think tank, GTRI, strongly advises India to uphold its digital payment policy autonomy and resist external pressures, particularly from the US, to safeguard the future of its robust payments ecosystem.
Key Points
- India urged to defend UPI policies against US pressure to maintain competition and autonomy.
- Lok Sabha passed a bill allowing charges on UPI and other electronic payments.
- Zero Merchant Discount Rate (MDR) significantly boosted UPI growth, benefiting small vendors.
- Sustainable funding models for UPI are needed, but general merchant charges are not the only solution.
- India should retain payment data localisation rules for security and national interest.
India must not rewrite its UPI policies under US pressure, and it must defend competition, policy autonomy and the long-term sustainability of its payments ecosystem, think tank GTRI said on Thursday.
Lok Sabha on Thursday passed a bill to amend the Payment and Settlement Systems Act, 2007, which authorises the government to permit banks and other service providers to levy charges on payments through unified payments interface (UPI) and other notified electronic payment modes.
Understanding UPI Funding And Growth
GTRI said that at present, banks and payment-system providers cannot directly or indirectly charge users for prescribed payment methods, including UPI and RuPay debit cards. It said that zero MDR contributed significantly to this growth by allowing consumers, small shops and roadside vendors to make and receive payments without transaction charges. However, banks, the National Payments Corporation of India (NPCI) and payment companies must invest in cybersecurity, fraud prevention, servers, dispute resolution and system expansion, it added.
"A sustainable funding model may therefore be necessary. But financing the system does not automatically require a general merchant charge. "Alternatives include targeted budgetary support, government incentives, charges on large commercial transactions, cross-subsidisation from financial services and narrowly designed fees applicable only to high-turnover merchants," it said.
Addressing US Criticism And Data Localisation
GTRI claimed that the legislative change also comes against the backdrop of US criticism of domestic digital-payment systems. The US Trade Representative's 2026 National Trade Estimate Report on Foreign Trade Barriers criticised both Brazil's Pix and India's UPI and RuPay framework. "India must not rewrite its UPI policies under US pressure. It must defend competition, policy autonomy and the long-term sustainability of its payments ecosystem," GTRI Founder Ajay Srivastava said.
India should also retain its payment-data localisation rules. Payment data are sensitive and commercially valuable. Keeping these data in India helps regulators investigate fraud, improve cybersecurity and protect national security, he said. "India should not introduce MDR simply to address US trade complaints or protect the profits of Visa, Mastercard and other foreign payment companies," he said. Any decision on charges should be based on the cost of running UPI and ensuring its long-term sustainability, he said, adding that American companies already have wide access to India's payment market.
