Why UPI surcharges are a bad idea
The Indian government has passed an amendment allowing surcharges on UPI and RuPay transactions, a move that has sparked debate regarding the funding of digital payment infrastructure. Critics argue that the government should continue to subsidize these systems as they are more efficient than traditional physical currency.
Why it matters
The debate over UPI surcharges touches on the broader economic question of who should bear the cost of maintaining national digital public infrastructure.
The Lok Sabha recently passed an amendment to a law to make it legal to levy surcharges or fees on any UPI and RuPay debit card transactions. The government, meanwhile, announced that it proposes to do so only for purchases of ₹2,000 and more from businesses with a threshold of turnover. But with the legal bar removed, government decisions can change any time.
UPI transactions near record level of ₹29.8 lakh crore in August
The stated logic, as the Reserve Bank of India (RBI) Governor Sanjay Malhotra recently put it, is that “somebody has to pay” for UPI. The Indian government is said to have subsidised UPI by about ₹2,000 crore in the past one year.
Let us first examine the stated reason, and then come to what most knowledgeable people think is the real reason.
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