YES Bank, BOB, PNB, IndusInd Bank, HDFC Bank shares: Key beneficiaries of MDR charges

Bank stocks such as Punjab National Bank, Axis Bank Ltd, YES Bank Ltd and State Bank of India gained up to 4 per cent in Wednesday's trade as the lenders are seen as key beneficiaries of the announcement on MDR charges on UPI transactions above Rs 2,000.

Given outsized UPI beneficiary volume share, YES Bank is seen as the standout beneficiary, with 5-10 per cent of PPOP and 6-12 per cent of PBT impact, Citi said in a note. It said banks such as Bank of Baroda, PNB and IndusInd Bank with have a positive 2 per cent impact  on their profit before tax (PBT). Axis Bank, SBI and Federal Bank may have 1-2 per cent impact on PBT; HDFC Bank and ICICI Bank, given their larger fee- income base; and KMB and AU SFB, may see a sub-1 per cent benefit.

"We view this as a structurally positive, long-awaited monetization event for UPI-heavy banks and TPAPs," Citi said.

Overall, the development is seen adding a net incremental ecosystem revenue of Rs 16,000-17,000 crore, split roughly as banking system, UPI-App Provider (25 per cent), and non-bank payment aggregators (15 per cent).

UPI payment rails, which have operated on a 'zero-MDR', are being partially monetized through a new tiered MDR framework. Importantly, MDR is not a tax or a government/NPCI charge. It is a fee distributed among ecosystem participants to fund continued operation and expansion of the UPI network.

Foreign brokerage UBS expects banks to retain 60-70 per cent of the revenue pool with remainder accruing to payment players. It expects large private banks who are strong both on issuing and acquiring side to benefit though unlikely to materially boost their earnings given their size.

"Our high level maths also indicate that both Paytm and PineLabs potentially have 15 per cent upside in their FY28 EBITDA based on their share in fees," UBS said.

UBS said it likes ICICI Bank and Axis Bank in large private banks and Chola, Shriram amongst large NBFCs.

Among bank stocks, PNB led the BSE Bankex gainers, rising 4.3 per cent to Rs 24.10. Axis Bank was up 2.04 per cent, followed by YES Bank, SBI, Union Bank, and IDFC First Bank that gained up to 2 per cent. HDFC Bank and ICICI Bank were trading flat.