UPI MDR Could Create Rs 20,000 Crore Revenue Pool For Banks, Payment Firms

The introduction of the Merchant Discount Rate (MDR) on selected UPI transactions could create an annual revenue pool of nearly Rs 20,000 crore for banks and digital payment companies, according to estimates from several leading brokerages.

The National Payments Corporation of India (NPCI) has introduced a 0.4 per cent MDR on person-to-merchant (P2M) UPI transactions above Rs 2,000. The new charge will take effect from October 15 and could significantly change the revenue structure of India’s growing digital payments sector.

According to Goldman Sachs, the overall industry revenue pool could reach around Rs 20,600 crore. The brokerage estimates that nearly half of the total UPI transaction value could attract the full 40 basis points MDR.

Morgan Stanley says the move could significantly affect the earnings of payment companies. It estimates that the EBITDA of some digital payment providers could rise by 38-48 per cent in FY28 and FY29. The brokerage also expects another large payment provider to increase its adjusted EBITDA by around 24-29 per cent.

UBS estimates that banks and payment companies could gain an annual revenue opportunity of Rs 10,000-15,000 crore. Banks could retain around 60-70 per cent of this amount, while digital payment providers could receive the rest.

JPMorgan estimates the maximum revenue pool at around Rs 17,000 crore, including nearly Rs 11,700 crore for issuing and acquiring banks. Citi estimates the annual UPI ecosystem revenue at Rs 16,000-17,000 crore.

Merchants will pay the MDR, not consumers. The charge will also remain capped at Rs 300 for transactions of Rs 75,000 and above.

However, the way banks, UPI application providers and payment aggregators distribute the MDR revenue will determine its actual impact on individual companies.

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