India faces mounting debate over potential charges on its digital payments system as a think tank warns that diluting UPI rules could weaken competition and compromise national security interests.
India should not dilute its Unified Payments Interface rules in response to pressure from the United States, according to the Global Trade Research Initiative, which said any retreat would weaken competition, reduce policy control and threaten the long-term health of the country’s digital payments system. The think tank argued that India’s payments architecture should be shaped by domestic public interest rather than the commercial priorities of foreign firms.
The warning comes as debate over charges on UPI transactions has intensified in New Delhi. India.com reported that the Lok Sabha has passed a bill amending the Payment and Settlement Systems Act, 2007, a move that would allow the government to authorise banks and payment providers to levy charges on UPI and other notified electronic payment methods. In practical terms, that would mean merchants could face fees for payments made through apps such as Paytm, PhonePe and Google Pay.
That possibility cuts against the policy India has followed for years. Under the current zero-charge framework, neither banks nor payment system providers may impose merchant discount rates on UPI payments or RuPay debit card transactions. The policy helped drive mass adoption among small traders, street vendors and ordinary consumers by keeping digital payments free at the point of use. But it has also left the sector with limited direct revenue, while infrastructure costs continue to rise.
GTRI said those costs should be met through targeted budget support, government incentives or, at most, modest fees on large merchants with high turnover rather than on smaller businesses. The group also linked the issue to wider concerns about market structure, noting that PhonePe and Google Pay together dominate most UPI transactions, according to recent parliamentary scrutiny and industry reporting. The National Payments Corporation of India has previously floated a cap on any one player’s monthly share, as policymakers look for ways to avoid a durable duopoly in a system that now sits at the centre of India’s retail payments network.
The broader political context matters because India’s UPI and RuPay systems have also drawn criticism in the Office of the United States Trade Representative’s latest trade review, which GTRI said should not prompt a policy rethink designed to protect Visa and Mastercard. The think tank also stressed the importance of keeping payment data stored in India, arguing that domestic data localisation supports fraud investigation, cybersecurity and national security.
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