Union Budget 2026: UPI Incentives Raised Fivefold, Industry Unsatisfied; Paytm in Focus

The Union Budget for FY26 increased the allocation for UPI incentives dramatically, prompting a mixed reaction from fintech firms and payment bodies. 

Increased allocation and its immediate impact 

The revised FY26 estimate for UPI linked incentives is now ₹2,196 crore, a 5 fold rise from the earlier ₹437 crore. FY27 is projected at ₹2,000 crore.  

The uplift lifted sentiment among listed fintech companies, with One 97 Communications shares rising 5% intraday and later closing up 1.4% at ₹1,184.20. Mobikwik also recorded a gain of around 4%. 

Industry concerns over sustainability 

The Payments Council of India acknowledges the higher figure but argues that processing close to 30 crore UPI transactions daily at zero merchant discount rate (MDR) requires a larger pool. Rising compliance and servicing costs could strain the ecosystem if reliance on taxpayer funded incentives continues. 

Proposed calibrated MDR approach 

Vishwas Patel, chairman of the Payments Council, suggests a regulated MDR of 30 basis points for large merchants while keeping zero MDR for smaller merchants. This model aims to reduce dependence on government incentives and support long‑term scalability without hindering mass adoption. 

Read More: Paytm Share Price in Focus After Q3 FY26 Earnings Results: Revenue up by 20% YoY; Net Profit at ₹225 Crore! 

Conclusion 

The FY26 budget raises the UPI incentive pool to ₹2,196 crore and earmarks ₹2,000 crore for FY27. While the increase is welcomed, industry bodies highlight that the allocation may still fall short of the funding needed to sustain zero MDR operations across the growing transaction volume. 

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