Subbarao for charging for UPI transactions

Former RBI Governor D. Subbarao and others at the release of the book ‘Cashless Nation: How UPI Changed Everything’ authored by Santanu Paul and B. Sambamurthy, in the city on Saturday. | Photo Credit: th-online Administrator

Former Reserve Bank of India Governor D Subbarao has made the case for introducing charges on some Unified Payments Interface transactions, arguing that although UPI is free to its users, operating the system involves costs that must ultimately be borne by someone.

While acknowledging the powerful argument that levying charges might force millions of informal and unorganised sector participants to exit and return to cash, he argued that leaving transactions free would discourage banks from innovating and maintaining systems.

“I believe that we should charge for them, because the user should pay,” he said. He pointed out that if users do not pay, banks will distribute the burden across all customers, which could result in lower interest on fixed deposits and costlier loans.

He said the government could adopt a calibrated approach, beginning with charges on high-value transactions before considering wider application.

Speaking at the launch of the book ‘Cashless Nation’, authored by Santanu Paul and B. Sambamurthy, he addressed three critical contemporary challenges surrounding the digital payment ecosystem – transaction pricing, gender parity, and the credit gap.

On gender parity in using UPI transactions, the former RBI Governor observed that while UPI has narrowed the gender gap, it has not closed it. Noting that half the Jan Dhan Yojana accounts are held by women, he pointed out that women carry out less than a quarter of UPI transactions.

He said that even when women have access to mobile phones, they often lack the privacy, confidence, or agency to use the platform.

Highlighting the credit gap as possibly the most critical issue, he said that the true concept of financial inclusion was never just holding an account or transferring money, but accessing the formal financial sector to obtain credit to expand businesses and improve livelihoods.

Stating that attending to the working capital needs of such people was not enough, he said that data, paired with artificial intelligence, must enable banks to assess a borrower’s capacity and willingness to repay, unlocking long-term investment credit.

Highlighting the role of the ‘JAM trinity’ (Jan Dhan, Aadhaar, and the mobile phone), Subbarao observed that while each was significant on its own, their simultaneous arrival created a breakthrough in financial inclusion.

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.