Discuss how Digital Public Infrastructure can be financed sustainably without undermining financial inclusion, with reference to UPI.

Digital Public Infrastructure (DPI) means shared, interoperable digital rails such as Aadhaar and UPI. It spread fast because it was free to use. UPI now handles about 791 million transactions a day (August 2026) [1]. The question is no longer whether DPI should recover its costs, but how to do so without shutting out the people it was built for.

Why the zero-cost model is under strain

• Scale: UPI processed about 241.62 billion transactions worth about ₹314 lakh crore in FY 2025-26 [1]. Growth at this scale demands more spending on security, resilience and capacity [1].
• Fiscal burden: under zero MDR, the exchequer paid banks through incentives, with a ₹1,500 crore outlay for FY 2024-25 alone [2]. NPCI has told the Supreme Court that zero MDR for all UPI is "no longer sustainable" [1].

Sustainable financing options

• Tiered user-pays: the 0.4% MDR on P2M payments covers only about 4% of merchant transactions [1]. A narrow band of merchant payments would fund the whole system.
• Performance-linked subsidies: 20% of incentive claims depended on banks keeping technical declines below 0.75% and system uptime above 99.5% [2]. Public money then pays for quality, not just volume.
• Value-added services: revenue from credit-on-UPI, cross-border links and other premium services, while the basic rails stay free.
• Co-funding: banks and fintechs that profit from the rails share the cost of cybersecurity and fraud controls.

Safeguarding financial inclusion

• Protect the base: keep P2P transfers free and exempt small merchants. The earlier scheme gave zero MDR plus a 0.15% incentive on P2M payments up to ₹2,000 to small merchants [3].
• Prevent pass-through: caps and disclosure rules so merchants do not load the MDR onto customers or go back to cash.
• Predictable policy: a pricing framework drawn up after consultation, under RBI oversight. The pending Supreme Court challenge [1] shows what sudden policy shifts cost.

Free core (P2P, small merchants) → Targeted subsidy (low-value P2M) → Fee (narrow merchant band)

Tiered model for financing DPI

Sustainable DPI financing therefore lies in calibration: free access for the vulnerable, conditional subsidy at the margins, and fees for those who can pay. This keeps UPI a public good that funds its own resilience. It also advances SDG 8.10 (access to financial services for all) and the inclusive goal of Digital India.