YES Bank Steps Up UPI Focus Ahead of New MDR Regime

YES Bank is preparing to expand its digital payments business as the Unified Payments Interface (UPI) moves towards a new merchant discount rate (MDR) structure from October 15. 

The bank already has a sizeable presence in UPI. According to its FY26 annual report, YES Bank holds a 57.5% market share as a UPI Payee Payment Service Provider (PSP) Bank and ranks second among UPI Payer PSP Banks with a 38.7% share. 

The bank is now looking at areas such as agentic AI payments, credit lines on UPI, express loans, cross-border payments and biometric authorisations.

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0.4% MDR to apply to select UPI transactions

Under the new structure, a standard MDR of 0.4% will apply from October 15 to person-to-merchant (P2M) UPI transactions above ₹2,000. 

P2M transactions account for about 63% of UPI transactions by volume. However, most of these transactions will not attract the charge. Around 96% of P2M transactions are exempt because they either fall below the ₹2,000 threshold or come under the zero-MDR framework for small merchants. 

Banks are still working through the potential revenue from the new structure. Estimates cited in the report put the annual revenue pool for the overall UPI ecosystem at between ₹14,000 crore and ₹20,000 crore. 

YES Bank has been identified as one of the banks positioned to benefit from the introduction of UPI charges, given its existing transaction volumes and market share.

YES Bank plans to expand digital payments

Naveen Chaluvadi, chief digital officer at YES Bank, said the bank will put greater focus on agentic AI payments, credit lines on UPI, express loans, cross-border payments and biometric authorisations. 

The bank has also used a co-creation approach for its UPI infrastructure, working with fintech companies, digital platforms and open-banking solutions rather than building all of its capabilities internally. 

YES Bank's digital payments presence predates UPI. In 2010-11, the bank partnered with Nokia and mobile payments company Obopay on Nokia Money, an early mobile money and wallet platform. 

The following year, it launched micro-banking outlets that enabled local shopkeepers to offer payment and fund-transfer services using terminals or mobile technology. 

When UPI was launched in 2016, YES Bank had partnerships with 50 entities. The bank retained a 42% UPI market share even during the 2020 moratorium. 

Strong presence across payment systems

UPI is not the only payment network where YES Bank has a significant share. Its FY26 annual report shows market shares of 28.3% in Aadhaar Enabled Payment System (AePS), 21.6% in NEFT, 8.2% in IMPS and 15.2% in NACH. 

The bank's UPI position gives it an established base as the new MDR structure comes into effect. The focus now is on expanding the range of digital payment and lending products connected to that network. 

The bank's digital strategy also includes cross-border payments and newer technology-led payment solutions, alongside its existing UPI operations.