A Study on UPI and Digital Payment Growth and Its Impact on the Revenue of Select Public and Private Sector Banks in India

Arun H Nyamagoud 1, Ramya H P 2

1Student, Dayananda Sagar College of Engineering, Bangalore.

2Assistant Professor, Department of Management Studies, Dayananda Sagar College of Engineering, Bangalore.

Abstract – India's digital payments landscape has been transformed by the Unified Payments Interface (UPI), which grew from roughly 4,600 crore transactions worth Rs 84.17 lakh crore in FY22 to 18,585 crore transactions worth Rs 260.56 lakh crore in FY25, now accounting for over 83% of the country's digital payment volume. This paper examines how this growth has translated — directly or indirectly — into revenue outcomes for select public sector banks (State Bank of India, Punjab National Bank, Bank of Baroda) and private sector banks (HDFC Bank, ICICI Bank) over FY2016-17 to FY2024-25. Because UPI operates under a zero Merchant Discount Rate (MDR) regime for person-to-person and person-to-merchant transactions, the study finds that its revenue impact on banks is largely indirect, flowing through CASA retention, transaction-cost savings, cross-selling, and fee income in adjacent digital products rather than direct UPI transaction fees. Private banks such as ICICI report a distinct, growing digital banking revenue line (25.78% of retail banking revenue, Rs 40,264 crore, FY25), while public sector banks emphasise transaction migration and inclusion metrics without comparable standalone disclosure. The paper argues that the absence of a formal UPI monetisation model remains a structural constraint on bank profitability from retail digital payments, even as UPI reshapes customer engagement and operating economics.

Key Words: UPI, digital payments, bank revenue, fee income, MDR, financial inclusion, India.