On 19 March, the Indian government slashed incentives for UPI transactions by more than half to Rs 1,500 crore for FY25.

After it launched in 2016, UPI very quickly became the backbone of India’s digital economy–thanks to demonetisation, and well, the pandemic. Most importantly, it was the radical decision to keep it free that fuelled its growth. No merchant fees. No transaction costs. But the zero-MDR policy came at a price because payment processors lost more than 2500 crore last year alone. And with the new budget cut, it will get worse.

The system is clearly showing signs of strain.

While UPI continues to post record volumes—18 billion transactions in March alone—many are asking an uncomfortable question:

Can India keep up its digital payments miracle without letting the infrastructure collapse under its own weight?

Tune in.

Do you think people will stop using UPI if there is a small fee involved?

*This episode was originally published on 21st April, 2025.

Daybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

One channel. Every show. No more switching feeds.

Follow The Ken on Apple Podcasts or tune in on The Ken app.