According to a report by brokerage firm Bernstein, the introduction of a merchant discount rate (MDR) framework on eligible UPI merchant transactions could generate an annual industry revenue pool of approximately Rs 27,000 crore by FY28.
Key Highlights & Revenue Projections
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Growth in Transaction Value: Bernstein projects that UPI person-to-merchant (P2M) transaction value will expand from roughly Rs 100 lakh crore to Rs 144 lakh crore by FY28.
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Blended Effective MDR: While headline proposals point to a 40-basis-point (bps) charge on certain transactions, exemptions and concessional tiers bring the blended effective MDR down to about 19 bps across the entire P2M pool.
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Exemptions and Concessions: Transactions under Rs 2,000, AutoPay mandates, and select segments remain free or subject to lower rates (such as 2 bps for capital markets), ensuring that small-value retail payments remain shielded.
Estimated Distribution of the Revenue Pool
Under Bernstein’s illustrative distribution breakdown, the projected Rs 27,000 crore annual pool is expected to be allocated across various ecosystem participants:
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Issuing Banks: ~Rs 10,800 crore
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Consumer-Facing UPI Apps (TPAPs): ~Rs 5,400 crore
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Merchant-Side Payment Apps: Rs 5,400 – Rs 6,800 crore
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Partner Payer PSP Banks: ~Rs 2,700 crore
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Beneficiary / Acquiring Banks: Rs 1,400 – Rs 2,700 crore
Industry stakeholders note that rather than acting as a major windfall, the MDR serves as a vital sustenance fee to fund necessary ongoing investments in cybersecurity, infrastructure scaling, and fraud prevention.
