Archive · 16 Sep 2026
UPI MDR Monetization May Benefit Banks and Payment Players
UPI payments have generally had no merchant discount fee, or MDR.
A new system would allow some fees to be charged on certain UPI transactions.
The money would be shared by banks and payment companies that help process the payments.
Analysts estimate that this could create Rs 16,000-17,000 crore in new revenue for the ecosystem.
UBS expects banks to receive about 60-70 percent of that money.
Citi said the change could especially help banks that handle many UPI payments and third-party apps.
UBS said Paytm and Pine Labs could see a potential 15 percent increase in FY28 EBITDA.
However, the effect may not significantly increase earnings for the biggest private banks because they are very large.
UPI payment rails are being partially monetized through a new tiered MDR framework after operating with zero MDR.
The development is estimated to generate Rs 16,000-17,000 crore in additional ecosystem revenue.
UBS expects banks to retain 60-70 percent of the revenue pool, with the remainder going to payment players.
Citi called the change a structurally positive, long-awaited monetization event for UPI-heavy banks and TPAPs.
PNB led BSE Bankex gains at 4.3 percent, while Axis Bank rose 2.04 percent and several other banks gained up to 2 percent.
- Who
- Banks, UPI app providers, payment aggregators, and payment companies including Paytm and Pine Labs are the main participants.
- What
- UPI payment rails are being partially monetized through a new tiered MDR framework.
- Where
- The development concerns India’s UPI payments ecosystem and shares traded on the BSE.
- Why
- The MDR framework is intended to create revenue for ecosystem participants and support the continued operation and expansion of UPI.
Positive Analyst View
Cautious Earnings View
Impact on banks
Positive Analyst View
Citi described the change as a structurally positive and long-awaited monetization event for UPI-heavy banks and third-party application providers.
Cautious Earnings View
UBS said large private banks could benefit, but the change is unlikely to materially increase their earnings because of their size.
Impact on payment companies
Positive Analyst View
UBS’s calculations suggest Paytm and Pine Labs could potentially gain 15 percent in FY28 EBITDA from their share of fees.
Cautious Earnings View
The article does not provide a comparable estimate for other payment players, and the revenue will be divided among multiple ecosystem participants.
Stock-market response
Positive Analyst View
Punjab National Bank, Axis Bank, YES Bank, State Bank of India, Union Bank of India, and IDFC First Bank gained after the development was reported.
Cautious Earnings View
HDFC Bank and ICICI Bank were trading flat, indicating that the expected benefit was not uniform across major banks.
- Estimated incremental revenue
- Rs 16,000-17,000 crore for the overall ecosystem
- Bank revenue share
- UBS expects banks to retain 60-70 percent of the revenue pool
- UPI app-provider share
- The article estimates UPI app providers at 25 percent
- Non-bank payment-aggregator share
- The article estimates non-bank payment aggregators at 15 percent
- PNB share move
- Punjab National Bank rose 4.3 percent to Rs 24.10
- Axis Bank share move
- Axis Bank rose 2.04 percent
- Potential Paytm and Pine Labs impact
- UBS estimates potential 15 percent upside in FY28 EBITDA