UPI: Who Owns India’s Digital Payment Infrastructure and Who Makes Money From It?

By CA Anil K. Jain, Chartered Accountant | Macro - Economist | Policy Researcher | Author

President – Ahimsa Foundation India

India’s Unified Payments Interface (UPI) has transformed the country’s payment ecosystem, connecting consumers, merchants, banks and technology platforms through instant digital payments. Its enormous transaction volumes, however, often create confusion about who owns the system and who actually earns money from it.

UPI is not a conventional private payment gateway. It is an interoperable bank-to-bank payment system developed and operated by the National Payments Corporation of India (NPCI), an RBI-regulated payment system operator. Applications such as PhonePe, Google Pay, BHIM, Paytm and banking apps provide the customer interface, while funds move between participating bank accounts through UPI infrastructure.

Who Owns UPI?

UPI itself has no shareholders; NPCI is the relevant corporate entity. NPCI was established by India’s banking industry with support from the Reserve Bank of India and Indian Banks’ Association.

As of 31 March 2025, major NPCI promoter shareholders included Union Bank of India, Punjab National Bank and Bank of Baroda at approximately 9.15% each; Canara Bank at 8.14%; and SBI, Bank of India, HDFC Bank, ICICI Bank, Citibank and HSBC at approximately 7.12% each. Together, these ten shareholders represented about 78.19% of NPCI’s equity. However, NPCI ownership and UPI transaction economics are separate. A bank owning 9% of NPCI does not automatically receive 9% of UPI transaction charges.

The Scale of UPI

In August 2026, UPI processed approximately 24.51 billion transactions worth ₹29.82 lakh crore, with around 752 banks live on the platform. During April–August 2026, transaction value reached approximately ₹147.56 lakh crore. These numbers represent money transferred, not NPCI’s income. If ₹10,000 is transferred through UPI, the entire ₹10,000 counts toward transaction value, although it belongs to the payer and recipient. Only applicable fees, incentives and service revenues constitute income for ecosystem participants.

Historically, UPI expanded under a zero-Merchant Discount Rate (MDR) regime supported partly through Government incentives. For FY2024-25, for example, an approximately ₹1,500 crore incentive scheme supported eligible low-value merchant transactions.

The 2026 MDR Framework

Under the framework described in the article, scheduled from 15 October 2026, selected higher-value Person-to-Merchant (P2M) transactions become subject to MDR. Person-to-Person transfers remain free, while protected small-merchant and specified transactions remain outside the standard MDR structure. For ordinary eligible merchant transactions, the standard MDR is 0.40%, subject to a maximum ₹300 per transaction for transactions of ₹75,000 and above. The charge is merchant-side rather than an additional fee imposed on the consumer.

The standard MDR is divided approximately as follows:

Participant	MDR Share	Effective Share*
Issuing bank	40%	0.16%
Acquiring bank	30%	0.12%
UPI app/TPAP	20%	0.08%
PSP/Sponsor bank	10%	0.04%

*For eligible uncapped transactions.

Thus, every ₹100 of eligible uncapped merchant payments generates approximately 40 paise of MDR: 16 paise for the issuing bank, 12 paise for the acquiring bank, 8 paise for the UPI application and 4 paise for its PSP/Sponsor bank. Significantly, NPCI receives no direct percentage allocation from this particular MDR distribution.

What Does This Mean in Rupees?

For ₹1 lakh of fully eligible uncapped merchant transactions, total MDR would be ₹400: approximately ₹160 to the issuing bank, ₹120 to the acquiring bank, ₹80 to the UPI application and ₹40 to the PSP/Sponsor bank. For ₹1 crore, the corresponding figures become ₹16,000, ₹12,000, ₹8,000 and ₹4,000 respectively. Transaction size matters because of the ₹300 cap. Ten eligible transactions of ₹10,000 each generate ₹400 MDR in aggregate, whereas one ₹1 lakh transaction would generate only ₹300 because of the cap. Therefore, aggregate UPI transaction value alone cannot accurately determine ecosystem revenue.

Not Every UPI Payment Generates MDR

The 0.40% rate cannot simply be multiplied by India’s total UPI transaction value. P2P transfers, protected small-merchant payments and other exempt categories do not necessarily generate standard MDR. The article notes that approximately 96% of P2M transactions are expected to remain unaffected. Specified sectors such as railways, telecommunications, insurance, fuel and agricultural inputs have a ₹5-per-transaction structure, while eligible capital-market transactions have a separate 0.02% MDR.

Industry reporting cited in the article indicates that the new framework could eventually generate approximately ₹13,000–15,000 crore annually across the UPI ecosystem. This is an ecosystem-wide estimate—not NPCI’s revenue or profit.

The Bigger Picture

UPI’s economic significance extends far beyond transaction fees. It reduces dependence on cash, expands digital-payment acceptance, increases customer engagement for banks and gives fintech companies a platform for distributing financial services. The essential distinction is therefore clear: UPI transaction value is not revenue; NPCI ownership does not determine MDR distribution; and PhonePe, Google Pay or other UPI applications receive only their applicable share of transaction economics.

UPI is fundamentally a national interoperable payment rail connecting banks, technology platforms, merchants and consumers. Understanding that architecture is essential to understanding both who owns India’s UPI infrastructure and who ultimately earns money when India pays digitally. 

 

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