Home / Business and Economy / Government May End UPI Subsidies, Introduce Merchant Fees
Government May End UPI Subsidies, Introduce Merchant Fees
22 Sep
Summary
- UPI and RuPay subsidies are being phased out.
- No new subsidies paid for transactions since April 2025.
- Government budgeted ₹2,000 crore for FY27 incentives.
The government is contemplating the cessation of subsidies for smaller Unified Payments Interface (UPI) transactions. This potential shift aligns with the recent introduction of merchant discount rates (MDR) on larger UPI payments, enabling banks and payment firms to generate revenue. Taxpayer-funded incentives for UPI and RuPay transactions are being gradually phased out.
Disbursements for these incentives have seen a substantial reduction in recent fiscal years. The Centre allocated ₹2,000 crore for UPI and RuPay transaction incentives in FY27, yet no new subsidies have been paid for transactions completed since April 2025. This indicates a move towards making the payment ecosystem self-reliant.
Historically, the government compensated banks and payment providers after MDR on UPI and RuPay debit card transactions was set to zero in January 2020 to boost digital payment adoption. The incentive scheme aimed to mitigate the impact of zero MDR and encourage digital acceptance, particularly in rural areas.
