Mumbai: Shares of Paytm-parent One97 Communications, One MobiKwik Systems, Yes Bank and CMS Info Systems rallied in early trade on September 16 after the National Payments Corporation of India (NPCI) announced a new Merchant Discount Rate (MDR) framework for select UPI transactions.
The framework, which will come into effect from October 15, 2026, introduces a 0.4% MDR on qualifying person-to-merchant (P2M) UPI transactions above ₹2,000, subject to a maximum charge of ₹300 for transactions of ₹75,000 and above. The fee will be paid by merchants rather than consumers.
The announcement has triggered renewed investor interest in banks and digital payment companies because MDR could create a new revenue stream for participants in India’s rapidly expanding UPI ecosystem.
Paytm shares rise over 7%
Paytm-parent One97 Communications was among the biggest gainers in early trade.
The stock rose as much as 7.25% to ₹1,855.50 on the NSE. The rally reflected expectations that the return of MDR could improve the economics of the company’s payments business.
Paytm has a large merchant and consumer payments ecosystem, making changes to UPI monetisation particularly relevant to its earnings outlook.
Brokerages have previously highlighted the potential impact of MDR on Paytm’s margins. Morgan Stanley estimates that the new framework could potentially increase Paytm’s EBITDA estimates by 38–48% for FY28/FY29, although these are analyst estimates rather than company guidance.
MobiKwik gains more than 6%
Shares of One MobiKwik Systems also moved sharply higher.
The stock climbed as much as 6.54% to ₹213.99 during early trading, according to NDTV Profit.
MobiKwik is among the listed digital-payment companies that could potentially benefit from the introduction of a revenue-sharing mechanism around eligible UPI transactions.
The broader payments industry has operated for years without a conventional MDR on UPI, limiting direct monetisation from transaction processing. The new framework changes that for specified merchant payments.
Yes Bank emerges as key banking beneficiary
UPI-heavy banks also gained during the session, with Yes Bank recording the strongest move among the banks highlighted in the report.
Yes Bank shares rose as much as 4.46%, while State Bank of India gained around 1.45% in early trade.
Brokerages expect banks to capture a significant portion of the revenue generated through MDR.
Citi estimates that banks could receive around 60% of the annual UPI MDR revenue pool, while UPI application providers could receive about 25% and non-bank payment aggregators around 15%.
Citi specifically identified Yes Bank as a potential major beneficiary because of its UPI-linked transaction volumes.
CMS Info Systems shares also rally
Shares of CMS Info Systems rose as much as 7.22% to ₹239 during early trading.
The company is part of the wider digital payments and banking infrastructure ecosystem, and its shares moved alongside payment-focused stocks following the MDR announcement.
The simultaneous movement across payment companies, banks and payments infrastructure firms indicates that investors are assessing the potential impact of MDR across different parts of the UPI ecosystem.
Why UPI MDR matters to payment companies
UPI has become one of India’s largest digital payment platforms, but the absence of MDR has historically restricted the ability of banks and payment companies to directly monetise many transactions.
The new framework creates a mechanism through which qualifying merchant payments can generate revenue for participants in the ecosystem.
The standard MDR will be 0.4% for P2M UPI transactions above ₹2,000, with the charge capped at ₹300 for transactions of ₹75,000 and above.
Certain categories, including fuel, railways, telecom and insurance, will have a separate flat MDR structure for qualifying transactions above ₹2,000.
Capital-market transactions will also have a differentiated MDR rate of 0.02%, subject to the applicable cap.
Brokerages estimate large revenue opportunity
The potential size of the new revenue pool is one of the main reasons payment and banking stocks reacted positively.
UBS estimates an annual revenue pool of around ₹10,000 crore–₹15,000 crore for banks and payment companies. It expects banks to retain approximately 60–70% of the revenue, with the remainder going to payment companies.
Goldman Sachs has estimated a considerably larger potential industry revenue pool of around ₹20,600 crore, based on its assumption that roughly half of overall UPI transaction value could attract the full 40-basis-point MDR.
JPMorgan has estimated the maximum pool at approximately ₹17,000 crore, including around ₹11,700 crore for issuing and acquiring banks.
These figures are estimates and depend on the eventual transaction mix, MDR applicability and the distribution of revenue among ecosystem participants.
Banks could receive the largest share
The new MDR framework is particularly significant for banks because they play multiple roles within UPI, including issuing and acquiring transactions.
According to Citi’s estimates, banks could receive around 60% of the annual ecosystem revenue, while UPI application providers and non-bank payment aggregators would receive smaller portions.
This explains why banks with substantial UPI-linked transaction volumes have attracted investor attention following the announcement.
Yes Bank was specifically identified by Citi as a standout potential beneficiary.
Consumers will not directly pay MDR
Despite the market reaction, the new MDR framework does not mean that consumers will have to start paying a UPI transaction fee.
The MDR is a charge applicable to merchants on qualifying transactions. Small-value UPI merchant payments of up to ₹2,000 remain unaffected, while person-to-person transactions continue to be free.
More than 95% of P2M UPI transactions are expected to remain unaffected because they fall within the ₹2,000 threshold, according to NPCI’s explanation of the new framework.
This distinction is important because the introduction of MDR represents a monetisation change for the payments ecosystem rather than a blanket consumer charge on UPI.
What changes from October 15?
The key changes under the new framework are:
- Effective date: October 15, 2026
- Standard MDR: 0.4% on qualifying P2M UPI payments above ₹2,000
- Maximum standard charge: ₹300
- ₹2,000 and below: No MDR
- P2P transactions: Remain free
- Selected sectors: Flat ₹5 MDR for qualifying transactions above ₹2,000
- Capital-market payments: 0.02% MDR, subject to the applicable cap
- Who pays: Merchants, not consumers
The changes could therefore have a direct bearing on the revenue models of banks, payment apps and other companies involved in processing UPI transactions.
Market focus shifts to earnings impact
The sharp movement in Paytm, MobiKwik, Yes Bank and other stocks shows that investors are already assessing the potential financial impact of UPI monetisation.
However, the actual earnings benefit will depend on transaction volumes, the share of transactions that qualify for MDR, revenue-sharing arrangements and the costs associated with processing UPI payments.
Brokerage estimates also vary significantly, with projected annual industry revenue ranging from around ₹10,000 crore to more than ₹20,000 crore.
For now, the October 15 rollout marks a significant change in the economics of India’s UPI ecosystem, while the impact on individual companies will become clearer as the framework is implemented.