Digital Payments, Revenue Growth and Cost Efficiency in Indian Banking: Secondary-Data Evidence from the UPI Zero-MDR Period, FY 2021–22 to FY 2025–26

India’s Unified Payments Interface (UPI) processed 24,161.69 crore transactions worth ₹314.23 lakh crore in FY 2025–26, yet throughout the period studied merchants paid no merchant discount rate (MDR) on UPI payments. This article asks whether that scale is visible in bank revenue and cost efficiency. It combines official system aggregates, bank-level tables from the National Payments Corporation of India, government incentive disbursements and the published accounts of State Bank of India (SBI). Public sector banks executed about 57 per cent of approved top-50 remitter volume in December 2021 and December 2022, whereas appfacing payment service provider volume sat with a few private banks. Government incentives never exceeded ₹0.25 per UPI transaction, against an industry cost estimate of about ₹0.83 in FY 2025–26. SBI’s remitter volume rose 3.5-fold between December 2021 and December 2024 while its operating expenses rose 37 per cent. Its cost-to-income ratio fell from 55.66 to 50.11 per cent after FY 2023–24, mainly because income outgrew costs, although costs relative to assets also eased. The evidence is descriptive rather than causal and provides a pre-MDR baseline for the framework effective from 15 October 2026.