As per research firm Bernstein, the new MDR charges on UPI imposed by the Government of India could create a 270 billion rupee ($2.8 billion) annual revenue pool by financial year 2028. As per the report, banks will get the maximum share of profit.
What is MDR: A new Merchant Discount Rate (MDR) system for selected UPI transactions will start from 15 October 2026. Under the new rules, normal UPI money transfers between two people will continue to have no MDR charge. UPI payments to merchants up to ₹2,000 will also remain free. However, for eligible merchant payments above ₹2,000, an MDR of 0.40% will apply.
State Bank of India (SBI) is expected to benefit most among issuing banks, while Axis Bank Ltd. and Yes Bank Ltd. stand out because of their large roles as payment-service providers.
Bernstein estimates it could generate nearly 200 billion rupees in profit for the payments ecosystem, with banks retaining about 60%, or 120 billion rupees.
“Put differently, the industry could be earning an additional Kotak Mahindra Bank Ltd. worth of profits every year and a profit pool that is likely to grow at about 20% for next several years,” the analysts wrote.
The fee will apply to most UPI merchant payments by value. Transactions above 2,000 rupees accounted for 67% of money consumers paid to merchants in August, despite making up just 4% of transaction volume, data from operator National Payments Corporation of India showed.
The fee could boost banking-system profits by about 3%, though the benefits are likely to be “highly uneven,” Bernstein said. SBI could capture about 25% of an estimated 80 billion-rupee issuer pool, helped by its large share of savings accounts.
SBI is particularly important because it has a very large UPI customer base and could receive a significant share of MDR-related revenue. SBI Research reported that SBI was the top remitter member, with 5.2 billion UPI transactions in the period covered by its 2025 analysis, around 3.4 times the second-largest remitter, HDFC Bank.
