Banks and NPCI Commit to Prevent MDR Charges from Being Passed On, Says SBI
SBI Chairman CS Setty has identified the Unified Payments Interface (UPI) as a key opportunity for expanding credit offerings, including through Kisan Credit Cards and Mudra loans. He envisions UPI evolving into a point-of-sale credit platform, facilitating credit availability during transactions. Setty emphasized the bank’s commitment to collaborating with the National Payments Corporation of India (NPCI) and other lenders to ensure that the Merchant Discount Rate (MDR) is not passed on to consumers.
MDR Implementation and Transaction Exemptions
Setty noted that approximately 96% of transactions will be exempt from MDR, particularly person-to-person and person-to-merchant transactions under Rs 2,000. SBI is developing technology to identify these exempt transactions, with readiness expected by October 15, when MDR regulations take effect.
To prevent MDR costs from affecting retail customers and small merchants, SBI and NPCI will implement system-driven MDR calculations and transaction-level pricing controls. Awareness campaigns and grievance-redressal mechanisms will further enhance transparency in the process.
UPI Market Share and Technology Investment
Setty discussed the potential for MDR to help SBI regain market share in UPI transactions. He highlighted the bank’s growth from handling fewer than 10 crore transactions daily two years ago to around 20 crore transactions now, which constitutes about 25% of the total UPI ecosystem. He stated that sustaining this growth requires ongoing investment in technology and fraud-risk management.
MDR should be viewed as a means to support these investments rather than merely a revenue source. Setty emphasized the importance of technology in managing risks and improving customer service.
Enhancements to Yono App
SBI has revamped its Yono app to enhance the UPI experience and drive usage among customers, including those new to the bank. Currently, Yono processes 1-2 lakh transactions daily, with a goal to increase this to five crore transactions per day over the next two years. Setty aims to position Yono among the top five UPI apps while maintaining SBI’s status as the largest remitter bank on UPI.
Future Plans for UPI Business
SBI’s ambition is to build a large-scale, customer-centric UPI franchise. The bank plans to strengthen its issuer and remitter position while expanding merchant acquiring beyond its current base of 60 lakh merchants and approximately 13 crore monthly transactions. This expansion will target both offline and online merchants, aiming to provide a seamless and feature-rich UPI experience.
Economic Assessment
Setty provided an assessment of the economy up to September, noting that consumption demand remains strong, supporting credit growth. Retail personal and MSME credit growth has been healthy, while corporate credit has also seen reasonable growth, albeit with some moderation. GST collections further affirm the resilience of the consumption narrative.
Despite geopolitical tensions, including the West Asia conflict, Setty reported no adverse impact on capital expenditure (capex) momentum. Investment activity remains robust, with ongoing project announcements, particularly in the power sector, translating into project implementation and credit line drawdowns.
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