Banking Central | How will payments reshape in the new year?

UPI continues to lead among digital payments in India

• UPI to stay central, with monetisation and stricter regulation by 2026.
• CBDC will focus on government payments, not retail, moving beyond pilot phase
• Crypto will stay regulated as an asset, not as a payment medium or currency

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India will enter 2026 with an irony it rarely acknowledges. We are the world’s most enthusiastic digital payments market, yet we are still debating who pays for the pipes, who controls the data and who bears the risk when something breaks.

As far as the payments industry is concerned, it is fairly okay to say that the easy phase is over. What lies ahead is a far more political, regulatory and commercial contest over money in motion.

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Clearly, UPI will remain the undisputed backbone. There is no challenger in sight and none is needed. What began as a peer-to-peer tool has quietly become a national payments utility, embedded so deeply that even a temporary outage now feels like a civic failure.

By 2026, UPI will not be about growth numbers anymore. It will be about monetisation without backlash. The uncomfortable truth is that a system processing billions of transactions cannot remain free forever. Banks have absorbed the cost so far, but their patience is thinning. Expect calibrated charges, probably invisible to consumers at first, but unavoidable if the system has to scale sustainably.

The bigger shift will be invisible to users. UPI is slowly being nudged into a more tightly regulated, less anarchic structure. Caps on incentives, tighter compliance norms for fintechs and closer scrutiny of payment aggregators are not accidents. The state has realised that payments infrastructure is too critical to be left to a free-for-all.

On the other hand, the RBI’s CBDC project has been deliberately boring, and that is its greatest strength. Unlike crypto evangelists promised, the digital rupee is not trying to overthrow banks or dazzle consumers.

It is trying to quietly solve problems the public rarely thinks about — settlement risk, leakages in welfare transfers, and offline payments in areas where even UPI struggles.

In 2026, the e-rupee will likey stop being a pilot in spirit, even if the RBI avoids that word. Its real use will not be at supermarkets or petrol pumps. It will be in government payments, targeted subsidies and controlled ecosystems where programmability matters.

The state sees CBDC not as a rival to UPI, but as leverage. A tool that restores some control in a system where private apps have become too powerful for comfort.

Crypto, meanwhile, will continue to live in regulatory purgatory. It is taxed, tracked and tolerated, but still not trusted. India has made it clear that crypto will not be allowed to masquerade as money. That position is unlikely to change in 2026.

What may likely change is the tone. With global regulation tightening and domestic compliance improving, crypto could slowly find a narrow, clearly fenced role — as an asset, not a payment medium, and certainly not a parallel currency.

To sum up, India is moving from digital payments as a consumer convenience to digital payments as state infrastructure. UPI made cash optional. CBDC will make control programmable. And crypto will remain a reminder that innovation without trust rarely gets institutional blessing.

In other words, the next year will not be flashy. But it will decide who really runs India’s money rails.

(Banking Central is a weekly column that keeps a close watch on and connects the dots regarding the sector's most important events for readers)