Mumbai, August 20, 2026 (Yes Punjab News)
UPI needs a sustainable revenue model to support continued investments in technology, cybersecurity and infrastructure, former Reserve Bank of India Executive Director and former Bank of India Chairman G. Padmanabhan said on Thursday, backing the proposed introduction of Merchant Discount Rate (MDR) charges on high-value transactions.
Speaking on the sidelines of the Global Fintech Fest 2026, Padmanabhan said charging MDR on certain high-value UPI transactions could make the digital payments ecosystem more transparent and financially sustainable.
“I personally do not think so. I think I have written an article where I support this change. According to me, this will make the system much more transparent than it is today,” he said when asked whether MDR charges could weaken UPI.
Padmanabhan noted that the government has indicated that small-value UPI transactions would continue without charges for users. In his view, the proposed changes could therefore strengthen rather than weaken the digital payments ecosystem.
He also disagreed with the argument that reducing the government’s reimbursement burden was the main reason for introducing charges on select UPI transactions. He said reimbursement of UPI charges represented only a small component of the government’s overall finances.
Instead, Padmanabhan emphasised the growing cost of maintaining and upgrading the digital payments infrastructure. He said continued investments were required to improve technology and security systems, particularly as cybersecurity threats increase, while the sector also needs a viable return on capital to attract investment.
“The system has been telling the Reserve Bank and the government that there are costs to this, developments will have to happen, we will have to continuously upgrade our security systems because of cyber security issues and things like that, we need capital,” he said.
On monetary policy, Padmanabhan said the RBI’s forward guidance on interest rates reflected its assessment of inflation risks. His remarks came in the context of the latest Monetary Policy Committee minutes and indications of a possible rate hike in future policy meetings.
He said central banks globally were also evaluating the possibility of higher interest rates in response to evolving economic conditions. The RBI’s guidance, he added, should be viewed against this broader global backdrop.
“The Reserve Bank comes out with an opinion based on what they see in the economy. If they see possibilities of inflation, they give a forward guidance saying that this is possible,” Padmanabhan said.
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