UPI MDR Charges New Rules 2026: Hidden winners! Massive $2.8 billion annual revenue coming soon for Indian banks?

India's new UPI fee could create a ₹270 billion annual revenue pool by FY28, with banks expected to capture the biggest share. SBI, Axis Bank and Yes Bank are among those likely to benefit as charges on larger UPI transactions begin from October 15.

Written By Prabhakar Jha( with inputs from Bloomberg)

India's new fee on transactions made through its home-grown digital payments network could create an annual revenue pool of ₹270 billion ($2.8 billion) by fiscal 2028, with banks expected to take the largest share of the gains, according to Bernstein, Bloomberg reported.

State Bank of India is likely to emerge as the biggest beneficiary among issuing banks, while Axis Bank and Yes Bank could benefit from their significant roles as payment-service providers, Bernstein analysts including Pranav Gundlapalle said in a note.

UPI fee could create ₹270 billion revenue pool

The Merchant Discount Rate (MDR), which is paid by merchants to banks and other service providers for processing payments, will be levied on transactions routed through the Unified Payments Interface (UPI).

Bernstein estimates the fee could generate nearly ₹200 billion in profits for the payments ecosystem, with banks accounting for around 60%, or ₹120 billion, of the total, according to Bloomberg.

The analysts said the additional earnings could amount to a profit pool equivalent to the annual profits of Kotak Mahindra Bank, with the pool expected to grow by around 20% over the next several years.

Under the new structure, merchants will pay a fee of up to 0.4% on UPI transactions above ₹2,000 from October 15. The charge will be capped at ₹300 for transactions of ₹75,000 or more.

The fee is expected to cover most UPI merchant payments by value. Transactions above ₹2,000 represented 67% of the amount consumers paid to merchants in August, although they accounted for only 4% of the total transaction volume, according to data from the National Payments Corporation of India.

Bernstein estimates the new fee could increase banking-system profits by around 3%, although the impact is likely to vary significantly among banks.

SBI could account for roughly 25% of an estimated ₹80 billion issuer pool, supported by its large share of savings accounts.

Axis Bank and Yes Bank, meanwhile, have a disproportionately large presence in UPI payment processing compared with their respective shares of the traditional banking market.

However, the eventual gains for individual banks could depend on the proportion of merchant and person-to-person transactions they handle, as well as how the fees are divided with major payment platforms, Bernstein said.