A recent industry analysis indicates that major banks and fintech companies, including State Bank of India, ICICI Bank, Axis Bank, and PhonePe, are poised to become the primary beneficiaries should the government reintroduce Merchant Discount Rate (MDR) on specific Unified Payments Interface (UPI) transactions. The same report also highlights that organised retailers, jewellery stores, and hospitality businesses are likely to face the most substantial increase in operational costs.
Legislative Momentum for UPI Charges
The potential for UPI charges gained significant legislative traction recently when the Lok Sabha passed the Payment and Settlement Systems (Amendment) Bill, 2026. This Bill creates the necessary legal framework, amending the Payment and Settlement Systems Act, 2007, to allow the government to notify charges on designated electronic payment modes, explicitly including UPI transactions.
While the Bill removes existing statutory provisions that prohibited banks and payment service providers from levying MDR on notified electronic payment methods, it does not automatically reintroduce MDR on UPI. The specific rate, applicable merchant categories, and implementation timeline will be determined and notified separately by the government.
Who Stands to Gain?
The industry heatmap identifies fintech firms as the biggest potential beneficiaries, assigning them a "Very High" sensitivity rating. This is primarily because MDR would establish a direct revenue stream for payment processors. Companies such as PhonePe, PayU, Razorpay, Pine Labs, and Paytm, which facilitate merchant payments, are expected to benefit significantly if eligible transactions begin to attract MDR.
Similarly, major banks, including State Bank of India, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, and Yes Bank, are also anticipated to gain. As both acquiring and issuing banks, they currently process UPI transactions without earning MDR, instead relying on government incentives. The proposed framework could provide an additional, direct source of payment-processing income for these institutions.
Sectors Facing Higher Costs
Among merchant categories, organised retail and e-commerce businesses are deemed most exposed due to their extensive use of UPI and the concentration of large merchants. Major retailers like Reliance Retail, Tata Digital, Amazon India, Flipkart, and large supermarket chains could experience increased payment acceptance costs on eligible transactions. The analysis assumes a framework where a 0.25-0.30% MDR is applied to UPI payments exceeding ₹2,000 made to large merchants.
Other sectors rated with "High" sensitivity include jewellery retailers, hospitality chains, and consumer durable stores. These industries frequently involve purchase values above the ₹2,000 threshold and operate with an organised merchant presence, satisfying the conditions for potential higher MDR impact.
Moderate Impact Categories
Several sectors fall into the "Moderate" impact category. These include insurance, mobility services, healthcare, education, food and FMCG, Non-Banking Financial Companies (NBFCs), family-owned conglomerates, investment platforms, and sports, gaming, and media. For instance, while insurers may incur additional MDR costs, UPI also aids in premium collection and digital distribution, creating a mixed impact. Food and FMCG businesses, despite high UPI usage, are rated moderate because most transactions remain below the proposed ₹2,000 threshold.
Minimal Impact Sectors
Industries predominantly involved in business-to-business (B2B) transactions are largely expected to remain insulated from these changes. This includes sectors such as technology services, renewable energy, infrastructure, real estate, manufacturing, metals, defence, and consulting. These sectors typically have limited reliance on retail UPI payments or process relatively few consumer transactions above the ₹2,000 mark, resulting in "Low" or "Minimal" MDR sensitivity.
Uncertainty Remains
The report cautions that this analysis is an indicative exercise based on available transaction data and public disclosures. Crucially, the final contours of the MDR framework are yet to be notified by the government. Key details such as the exact MDR rate, the definition of "large" merchants, specific transaction thresholds, sector-specific exemptions, and whether an upper cap on MDR will apply, are still pending. Until these details are finalised, the sector rankings remain indicative rather than definitive.