Business · India Bureau
SBI Chief Backs Minimal MDR on UPI to Fund Infrastructure Growth
State Bank of India Chairman CS Setty has advocated for introducing a modest Merchant Discount Rate on UPI transactions to support banks' investment needs as digital payment volumes surge. Setty emphasized that consumer protections must accompany any fee structure to prevent additional charges being passed to end-users.
LSN India ·
Speaking at the Business Standard BFSI Insight Summit 2026, Setty outlined the infrastructure challenges facing the banking sector as Unified Payments Interface adoption accelerates across India. The SBI chief argued that while UPI has democratized digital payments, the absence of transaction fees has strained banks' capacity to invest in backend systems and technological upgrades required to handle rising transaction volumes.
Setty's remarks come amid ongoing industry discussions about the sustainability of India's zero-MDR UPI model. Banks have previously flagged concerns about the operational costs of processing millions of daily UPI transactions without corresponding revenue streams, contrasting with fee-based payment systems like credit cards.
The SBI chairman stressed that any introduction of merchant charges must include robust safeguards to ensure consumers do not bear the brunt through indirect price increases or service degradation. He emphasized the need for regulatory oversight to maintain UPI's accessibility while ensuring the financial viability of institutions processing these transactions.
Setty's position reflects broader industry sentiment that sustainable growth in India's digital payment ecosystem requires a balance between consumer welfare and institutional financial health. The remarks signal that major banks are seeking policy clarity on potential revenue mechanisms as UPI volume growth continues to outpace infrastructure investment capabilities.