SBI and Top Banks Could Benefit if UPI MDR Returns
If the government brings back Merchant Discount Rate (MDR) on UPI payments, SBI, HDFC, and Bank of Baroda are set to cash in. Industry folks say the biggest account-issuing banks—think SBI, Bank of Baroda, HDFC, Union Bank, and PNB—stand to make the most from this move.
SBI alone holds around a quarter of all UPI accounts in India. If MDR comes back, they could rake in up to ₹3,000 crore each year. Bank of Baroda and HDFC could each add about ₹800 crore, while Union Bank and PNB might see yearly gains near ₹700 crore.
MDR Revenue Sharing Formula Yet to Be Finalised
But here’s where things get fuzzy—the split isn’t final yet. Right now, the talk is that 60–70% of MDR will go to the account-issuing banks as interchange fees. That’s close to what banks used to get before the government scrapped MDR on UPI in 2020. Even so, the final decision rests with the NPCI Steering Committee, and they’re waiting for the government’s green light.
UPI Ecosystem Could Generate Up to ₹16,000 Crore
If MDR comes in at 0.30%, the entire UPI ecosystem might generate up to ₹16,000 crore in revenue every year. Even at 0.25%, it’s still a hefty ₹13,500 crore or so, depending how much business flows through UPI. Early signs suggest this fee won’t hit everyone; only big-ticket merchant payments and large businesses will pay, while smaller merchants and everyday users will likely be off the hook. The details aren’t locked in just yet.
How UPI MDR Revenue Will Be Shared
Now, who gets what? The MDR pie gets sliced up between account-issuing banks, beneficiary banks, PSP banks, merchant-acquiring payment aggregators, and, of course, NPCI. NPCI itself barely takes a bite—just 0.02 basis points per transaction.
Why PSP Banks Could Get a Bigger Share
UPI is different from cards because it leans heavily on PSP banks. These banks—like Yes Bank, Axis, ICICI, HDFC, and SBI—work with apps like PhonePe, Google Pay, and Paytm to make every transaction hum. Since they’re so vital to the system, they’ll probably grab a bigger share of MDR than they did with old-school card payments.
What It Means for India's Digital Payments Ecosystem
Bottom line? If MDR returns, digital payments in India could change big time. Banks and payment players would finally get a steady revenue stream, letting them invest more in UPI’s infrastructure. But for now, everything’s on hold until the government drops its final rules and NPCI signs off on the plan.
