A Bill to allow banks and payment operators to charge fees on Unified Payments Interface (UPI) and RuPay comes at a time when UPI transactions have witnessed rapid growth over the past five years and 12 countries have adopted India’s digital payment system.
To allay speculation over the proposed charges, the government has clarified that consumers will not have to pay transaction fees for using UPI and only merchants above a certain size would face a “nominal” levy. The clarification came after the Taxation and Other Laws (Amendment) Bill, 2026 was passed in the Lok Sabha on Thursday (August 6).
Nonetheless, the development raises a larger question: how has UPI become the backbone of the country’s digital payments, and how has it laid the ground for India’s emerging digital infrastructure diplomacy?
From UPI to digital diplomacy
Ever since its launch on April 11, 2016, UPI transactions registered exponential growth in India and other countries. Between FY 2021-22 and 2025–26, UPI transactions jumped from 4,595.61 crore (worth Rs 84.16 lakh crore) to 24,161.69 crore (worth Rs 314.23 lakh crore).
Similarly, between 2022 and 2025, UPI transactions done anywhere outside India rose from a meagre 180 transactions to more than 7.5 lakh transactions (a 20-fold increase). Against this backdrop of UPI’s growing significance, the International Monetary Fund (IMF) recognised it as the world’s largest retail fast payment system by transaction volume. India alone now accounts for close to half of all real time payment transactions made anywhere in the world.
This massive operating scale also signifies how UPI, beyond setting a global benchmark in the digital economic landscape, has laid the ground for India’s emerging digital infrastructure diplomacy. Before digging into its growing international relevance, let’s examine how and why the system was conceived.
How India built UPI for scale and exportability
Launched by the National Payments Corporation of India (NPCI) under the Reserve Bank of India’s regulatory oversight, UPI was conceived to solve a domestic problem of a highly cash-dependent economy running on fragmented payment systems that were not interlinked.
India faced three specific constraints:
1. A banking system comprising hundreds of institutions of different sizes.
2. A payment interface that had to stay neutral among them.
3. A user base for whom even a rupee per transaction was too much.
How India solved that problem is what made the solution exportable later. One of the most consequential steps was constituting NPCI as a not-for-profit utility – as an operator owned by all banks collectively. This ownership system helped secure a degree of neutrality that regulation alone wouldn’t have.
Had such a system been built by a dominant bank or a private platform, it would have been no less successful at home and no more transferable abroad. NPCI’s collective ownership anchored its transferability and credibility as a public utility. Running on a single shared standard, it produced an open, modular payment system with near-zero user cost that other developing economies could easily adopt. (The Indian Express)