Editorial Correspondence Received on August 12, 2025

Editorial Correspondence Received on August 12, 2025

In the bustling streets of Delhi-NCR and across India, a national crisis is unfolding: a surge in dog bites and rabies cases. Meanwhile, in the digital realm, a different kind of revolution is taking place. The widespread adoption of the Unified Payments Interface (UPI) is transforming India's financial landscape, but who is footing the bill, and who stands to gain?

Firstly, it's important to clarify that banks, along with payment aggregators or merchant banks, bear the brunt of UPI transaction costs, not the end users. The government has historically subsidized these costs to keep UPI free for users and encourage adoption. However, some private sector banks like ICICI Bank have started charging payment aggregators fees to offset their rising technology and operational costs.

The UPI ecosystem works such that the merchant’s bank pays an interchange fee to the payer’s bank for transaction processing, particularly for transactions involving prepaid payment instruments (PPIs) like mobile wallets. Customers themselves do not pay direct fees for UPI payments linked to bank accounts or in normal peer-to-peer or peer-to-merchant transactions.

This arrangement is beneficial for both banks and the government. It has massively accelerated digital payments adoption in India, driving financial inclusion, enabling greater transaction volume (UPI accounts for over 80% of fund transfer volume), and formalizing the economy. The government's support and zero-fee policy for users have been critical in this success. Despite costs, the scale of UPI transactions creates a competitive advantage and promotes a digital economy, benefiting banks through increased transaction flow and potential cross-selling, and the government through better financial transparency and reduced reliance on cash.

However, the increase in the Minimum Account Balance (MAB) amount by ICICI Bank has sparked controversy. Critics view this move as contempt for the general public and an elitist overture towards the wealthy. The RBI Governor has stated that the fixing of minimum balance, fines, and penalties is not part of the RBI's domain.

In the animal welfare sphere, the issue of stray dogs in India is a complex challenge in balancing public safety and animal welfare. A national policy focusing on sterilisation, vaccination, and awareness is needed, similar to those in Singapore and the Netherlands. The Supreme Court has prioritised protecting children, the elderly, and vulnerable communities from dog bites and rabies.

The government allows banks to charge different penalties, with an 18% additional cut as GST above these charges, further burdening bank customers. The RBI Governor has stated that the fixing of minimum balance, fines, and penalties is not part of the RBI's domain.

In conclusion, the UPI system, while primarily funded by banks and payment aggregators with government subsidies, has been instrumental in driving India's digital payments revolution. Despite the costs, the benefits of financial inclusion, economic formalization, and increased transaction volumes outweigh the expenses. However, the future of UPI remains under review, with rising costs and reductions in government incentives potentially leading to changes in how costs are allocated.

References: 1. ICICI Bank hikes minimum account balance five times 2. How UPI is shaping India's digital payments landscape 3. The rise and rise of UPI: How it's transforming India's digital payments 4. UPI transactions: Who pays the fees and why 5. Why UPI is free for users: A look at the costs and subsidies

1. The government has historically subsidized the costs of UPI transaction to keep it free for users and encourage adoption, but some private sector banks like ICICI Bank have started charging payment aggregators fees to offset their rising technology and operational costs.
2. The government's support and zero-fee policy for users have been critical in the success of UPI, as it has massively accelerated digital payments adoption in India and formalized the economy.
3. Meanwhile, in the animal welfare sphere, the government should consider implementing a national policy focusing on sterilization, vaccination, and awareness for managing the issue of stray dogs, as seen in countries like Singapore and the Netherlands.
4. The RBI Governor has stated that the fixing of minimum balance, fines, and penalties is not part of the RBI's domain, indicating that these practices are not regulated by the central bank.

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