UPI faces Rs 20,700 crore funding gap: Panel

New Delhi: A parliamentary standing committee has expressed grave concerns over the Unified Payment Interface (UPI) ecosystem facing a substantial funding gap, estimated at Rs 20,700 crore. The committee recommended that the government explore a self-reliant, tiered revenue model to ensure the financial sustainability of UPI without continuously burdening the government's coffers.

The committee noted that while UPI is projected to handle up to 150 billion transactions per month and attract 600 million new users, the current government incentive covers only 11% of actual costs and 14% of potential merchant discount rate (MDR) collections, leaving a significant funding gap.

The committee expressed deep concern over the stark contrast between the allocated budget of Rs 2,000 crore and the industry's estimated operational cost of Rs 20,700 crore. Legal provisions now exist to permit calibrated MDR on high-value transactions; however, any delay in notifying and operationalizing this framework could leave payment service providers heavily dependent on insufficient subsidies, jeopardizing critical investments in cybersecurity, fraud prevention, and network infrastructure.

The committee also recommended the deployment of an automated 24/7 API interface between reporting portals and Core Banking Systems for timely fund recovery, along with mandatory transaction safeguards and strict branch-level accountability for KYC lapses.