New Delhi, August 25, 2026 (Yes Punjab News)
Targeted Merchant Discount Rates (MDR) on select high-value merchant transactions could create a gross revenue opportunity of Rs 15,000-30,000 crore for India’s Unified Payments Interface (UPI) ecosystem, while keeping consumer and peer-to-peer (P2P) payments free, according to a CareEdge Ratings report released on Tuesday.
The report estimated the opportunity based on an MDR-addressable pool of Rs 61.13 lakh crore in FY26 and a nominal MDR of 0.25 per cent to 0.50 per cent on selected higher-value merchant transactions.
The report noted that the key issue would be how the resulting revenue is distributed across the payments ecosystem and whether merchants would be willing to bear the additional cost.
“The key question is how this revenue is ultimately distributed across the ecosystem and whether merchants will be willing to absorb the associated cost,” said Tanvi Shah, Senior Director at CareEdge Advisory.
“With UPI processing nearly 2,400 crore transactions in a single month, the ecosystem has reached a scale where sustainability of the underlying payment infrastructure is becoming as important as transaction growth,” Shah said.
Kalpesh Mantri, Assistant Director at CareEdge Advisory, said 741 banks were live on UPI and monthly transaction volumes had crossed 22 billion, with transactions worth around Rs 29.87 lakh crore recorded in July 2026.
He said the strong growth reflected increasing adoption, wider reach and the resilience of India’s digital payments infrastructure, positioning UPI for continued expansion and integration across more use cases.
India’s payments ecosystem has undergone a major structural shift from a cash-led system to one dominated by digital transactions. Digital modes accounted for 99.8 per cent of total transaction volume and 97.9 per cent of transaction value in the first quarter of FY27, according to the report.
CareEdge said the transformation has been supported by policy measures, interoperable infrastructure led by UPI, rapid fintech adoption, greater financial inclusion and increasing merchant digitisation.
The report also highlighted strong network effects and the depth of the digital payments ecosystem. Merchant payments (P2M) accounted for 29 per cent of UPI transaction value in Q1FY27.
The proposed targeted MDR model would therefore seek to introduce a revenue stream for sustaining payment infrastructure while retaining free UPI transactions for consumers and P2P transfers.
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