The bigger benefit for banks may actually be indirect

The bigger benefit for banks may actually be indirect This is where the story becomes more interesting for SBI, HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, Bank of Baroda, etc. A. More UPI transactions = more customer engagement UPI keeps customers deeply connected to their bank accounts. Every transaction gives the bank more: customer activity transaction history merchant relationships account engagement opportunities to cross-sell products NPCI data shows banks already handle enormous UPI volumes. For example, SBI, HDFC Bank, Bank of Baroda, Union Bank and PNB are among the major UPI remitter banks. So MDR adds a monetisation layer to an ecosystem banks already participate in heavily. 4. UPI can become a gateway for lending This could potentially be more valuable than the MDR itself. A merchant accepting ₹10 lakh, ₹50 lakh or ₹1 crore of UPI payments generates a very useful digital transaction trail. The bank can potentially understand: Sales → cash flow → transaction frequency → seasonality → business activity That can help banks offer: working-capital loans business loans overdrafts credit cards merchant loans equipment financing insurance investment products SBI Chairman C.S. Setty recently highlighted the possibility of using UPI as a credit platform, including credit at the point of transaction and products such as Kisan Credit Cards, MUDRA loans and overdrafts. Simple example A small shop receives: ₹20 lakh/month through UPI The bank can potentially see that the merchant has a recurring digital cash flow. Instead of merely earning a small MDR share, the bank could ultimately earn interest income from: ₹10 lakh working-capital loan That makes the UPI ecosystem strategically important for banks.