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UPI MDR: New Revenue Stream Emerges for Banks
17 Sep
Summary
- A 40-basis-point MDR on UPI merchant transactions may create Rs 27,000 crore by FY28.
- Issuing banks could receive Rs 10,800 crore, while UPI apps might earn Rs 5,400 crore.
- Transactions below Rs 2,000 and AutoPay mandates remain free from MDR charges.
The introduction of a 40-basis-point MDR on eligible UPI merchant transactions is poised to generate substantial revenue. By FY28, this could create an industry revenue pool of approximately Rs 27,000 crore. Issuing banks are estimated to receive a significant portion, around Rs 10,800 crore, while consumer-facing UPI apps might earn approximately Rs 5,400 crore. This levy aims to provide a sustainable economic model for UPI infrastructure.
Despite the headline 40 bps, the effective MDR will be lower due to exemptions. Transactions under Rs 2,000 and AutoPay mandates will remain free. Other categories like fuel and utilities will have flat charges, meaning only about 40% of total person-to-merchant (P2M) transaction value will attract the full MDR. This ensures the charges remain competitive compared to card fees.
