Standing committee on finance calls for sustainability of UPI

MUMBAI: The Standing Committee on Finance of the Eighteenth Lok Sabha has flagged concerns over the financial sustainability of digital payments, structural gaps in formal lending, cybersecurity weaknesses in banks, and declining insurance penetration in its Thirty-Second Report presented in March 2026 while examining the “Demands for Grants (2026-27)” for the department of financial services under the ministry of finance.

The committee, a legislative body authorised to examine the budgetary demands and policies of the finance ministry, reviewed the functioning of the Department of Financial Services, which serves as the nodal department of banking, insurance and other financial services.

The panel expressed concern about the financial sustainability of digital payment systems and warned that rapid growth of the Unified Payments Interface requires a viable revenue model. It observed that “the sustained expansion of UPI requires a viable revenue mechanism to support these investments, especially to promote UPI in Tier 3-6 cities”

While acknowledging that the incentive support provided by the Govt “constitutes only 11% of the cost incurred by the industry,” the committee said “establishing a viable revenue mechanism is critical to ensuring the UPI ecosystem achieves financial sustainability without perpetually straining the Government exchequer”. According to the report, in the “absence of MDR, adequate budgetary support by Government is essential to ensure that there is no further strain on the UPI Payment Ecosystem”.

On the banking sector, the committee highlighted what it described as a “critical structural deficit in formal lending” and recommended a policy shift in the Pradhan Mantri Jan Dhan Yojana. It urged the Govt to “officially pivot its policy focus from mere account acquisition to active usage, increased digital literacy and sustained, outcome-based financial utilization”.

The panel said that to support the broader objective of Viksit Bharat 2047, bank-led credit expansion had historically been the strategy adopted in developed economies. It suggested that “profit-making RRBs explore the IPO route, which would enhance accountability and responsibility”.

The report also raised concerns over cybersecurity and financial fraud. The committee said it had identified “several critical systemic failures that facilitate the laundering of proceeds of crime within the formal banking system”. It pointed to what it described as a “glaring failure in KYC and real-time monitoring”.

The panel recommended a “Penal Framework for Negligent Branches” under which banks hosting multiple “mule accounts” should face strict penalties. It also stressed the importance of the “Golden Hour,” described as “the critical 3-to-4-hour window for freezing defrauded funds,” and said “the best prevention is complete awareness”.

In the insurance sector, the committee said “overall insurance penetration has structurally declined” and pointed to what it termed a “critical solvency crisis” among public sector insurers.

It recommended that Insurance Regulatory and Development Authority of India must strictly enforce the 30-day turnaround time for Ombudsman compliance. The panel also said there should be “zero tolerance for claim repudiations during active hospitalizations”.

To strengthen local oversight of financial schemes, the committee recommended that the District Consultative Committee be presided over by the senior-most MP of the district. According to the panel, this would bring “necessary legislative accountability to the implementation of financial schemes”.

Ready to Make a Smarter Property Decision? Build Your Legacy with TOI Homes.