India Payments: MDR on UPI - Key takeaways from our webinar

Research evidence excerpt

India Payments: MDR on UPI - Key takeaways from our webinar

28 July 2026

India Financials

UPI has emerged as the backbone of India's digital payments ecosystem, driving large-scale Pranav Gundlapalle

+91 226 842 1407 adoption of cashless transactions under a zero-MDR framework. As the ecosystem matures,

pranav.gundlapalle@bernsteinsg.com recent policy discussions and industry commentary have reignited the debate around the

sustainability of this model, the distribution of costs across stakeholders, and the incentives

Ishan Mittal needed to support future growth. Against this backdrop, we hosted a webinar to discuss

+91 226 842 1442

ishan.mittal@bernsteinsg.com the arguments for and against MDR on UPI, potential implementation structures, and the

implications for the broader payments ecosystem. We summarize the key takeaways below.

Anirudh Gupta MDR on UPI: Should it be introduced? UPI transactions carry costs for banks, NPCI,

+91 226 842 1456 and payment platforms due to technology, infrastructure, and processing requirements.

anirudh.gupta@bernsteinsg.com

However, these costs (~30bps) have historically been offset by broader ecosystem benefits

(~50bps). Banks have benefited from lower ATM usage (~50% decline from peak volumes),

the government from reduced currency printing and cash management costs (currency

printing costs as a % of PFCE are down ~50%), and merchants from greater transaction

digitization and improved access to formal credit. As a result, there is a credible case for

retaining the current framework. That said, the need for payment platforms to monetize

their infrastructure investments, combined with recent policy discussions, has brought the

MDR debate back into focus.

Potential MDR structure for UPI: If introduced, MDR is likely to be merchant-funded