UPI costs banks ₹21,000 crore a year, NPCI chief flags need for merchant fees
NPCI CEO Dilip Asbe said UPI transactions cost India’s banking system about ₹21,000 crore annually, sharpening the case for merchant charges to support payment infrastructure. SBI alone bears an estimated ₹2,000-3,000 crore yearly cost as technology and server expenses rise.
What happened
NPCI CEO Dilip Asbe said UPI costs banks about Rs 21,000 crore annually, prompting a new merchant fee to recover costs. SBI's share is estimated at Rs
Key facts
- Rs 21,000 crore annual cost to the banking system
- Rs 2,000 crore-Rs 3,000 crore annual cost for SBI
- Server costs rose from Rs 20 lakh last year to Rs 1 crore
- NPCI has met about one-fourth of its technology requirements
Why this matters
Payments providers, banks, and merchant platforms may seek partnerships or acquisitions that reduce processing costs and strengthen UPI economics.
What to watch
- Finance Ministry, RBI, or NPCI consultation language on MDR, merchant discount rates, UPI incentives, or sustainable funding.
- Any differentiation between small and large merchants, online and offline payments, P2M and P2P transactions, or transaction-value thresholds.
- Union Budget or supplementary allocation changes to UPI incentive schemes.
- SBI and other large banks disclosing rising UPI operating costs, revised merchant acquisition strategy, or changes in payment-aggregator pricing.
- Payment aggregators introducing new platform, settlement, QR-device, API, or service fees that effectively monetize UPI acceptance.
- UPI transaction growth continuing to outpace bank infrastructure investment, accompanied by outage, latency, or fraud-control concerns.
- Model UPI acceptance cost sensitivity under 5, 10, and 25 basis-point merchant-fee scenarios, segmented by enterprise, mid-market, and small sellers.
- Audit payment routing, gateway contracts, settlement fees, chargeback terms, and value-added-service charges to identify indirect UPI cost pass-through risk.
- Prepare customer messaging and checkout UX contingencies that avoid steering consumers away from UPI if fees emerge.
- Expand optional payment-method routing and negotiate blended acquiring rates across UPI, cards, wallets, and pay-later providers.
- For marketplace and franchise models, define whether any new payment acceptance fee is absorbed centrally, shared with sellers, or reflected in merchant service pricing.