Why NPCI’s FY26 Profit Fell 12% Despite Strong Revenue Growth: AI and Marketing Costs Surge

NPCI’s FY26 Profit Fell 12% Despite Strong Revenue Growth: AI and Marketing Costs Surge

The National Payments Corporation of India (NPCI) reported a 12% decline in its standalone net surplus to ₹1,362 crore in FY26, despite a sharp increase in revenue as India’s digital payments ecosystem continued to expand.

NPCI’s standalone revenue rose 21% to ₹3,969 crore during the financial year ended March 2026, compared with the previous year. However, higher marketing expenses, depreciation and rising administrative and operating costs weighed on the bottom line.

The numbers are important for investors tracking India’s digital payments industry because NPCI sits at the centre of the country’s payment infrastructure, operating UPI and several other major payment systems.

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Why NPCI’s FY26 Profit Fell despite stronger revenue

NPCI’s net surplus stood at ₹1,552 crore in FY25, meaning the organisation recorded a decline of ₹190 crore in FY26.

The fall came despite higher revenue, with expenses emerging as the key pressure point. Marketing expenses and depreciation costs increased by around ₹100 crore, while administrative and operating expenses also climbed.

A notable factor was the increase in server-related costs linked to growing demand for artificial intelligence infrastructure.

The development highlights a broader challenge for India’s rapidly expanding digital payments ecosystem: transaction volumes are increasing at a remarkable pace, but maintaining and scaling the infrastructure required to support those transactions is also becoming more expensive.

NPCI did not comment on Moneycontrol’s queries regarding its financial performance.

NPCI FY26: Key Financial & UPI Highlights

UPI averaged around 66 crore transactions daily in FY26, underscoring its continued dominance in India’s digital-payments ecosystem.

UPI growth continues to reshape India’s payments market

NPCI remains the backbone of India’s digital payments infrastructure. The organisation operates the Unified Payments Interface (UPI) and serves as the settlement house for systems including IMPS, NACH and Aadhaar-enabled Payment System (AePS).

UPI accounts for around 89% of India’s digital transactions, making NPCI’s financial performance closely linked to the country’s broader shift towards digital payments.

UPI now facilitates almost 800 million transactions a day and more than 24 billion transactions a month, with monthly transaction value approaching ₹30 lakh crore.

For investors, these numbers demonstrate the enormous scale of India’s digital payments opportunity. At the same time, NPCI’s FY26 results show that greater transaction volumes do not automatically translate into proportionately higher surplus.

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Core Operations & Market Footprint

• UPI Dominance: UPI accounts for 89% of all digital transactions in India, facilitating nearly 800 million transactions daily (24 billion a month), worth close to ₹30 lakh crore.
• RuPay Card Network: RuPay commands over 85% market share in debit cards. Its credit cards, linkable to UPI, now power 20% of all domestic credit card transactions.
• Key Subsidiaries: NPCI continues to expand through NIPL (international partnerships), NBSL (BHIM operations), and NBBL (Bharat BillPay utility aggregations).

Could UPI MDR change NPCI’s revenue outlook?

The FY26 results come at a time when the government is considering bringing back a merchant discount rate (MDR) of 30 basis points for high-value UPI transactions at large merchants.

However, it remains unclear whether such a levy would result in any significant incremental revenue for NPCI.

The issue is important for the wider payments industry. Payment companies have been seeking MDR on UPI transactions, arguing that a revenue mechanism is necessary to make the ecosystem more sustainable and support continued investment as digital payments expand into smaller cities and remote parts of India.

NPCI operates as a not-for-profit organisation and was established under the aegis of the Reserve Bank of India. Consequently, its annual financial statements refer to net profit as net surplus.

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RuPay and UPI remain key parts of NPCI’s ecosystem

NPCI’s role extends beyond UPI. It also operates RuPay, India’s domestic card network, which competes with global networks such as Visa and Mastercard.

RuPay credit cards can be linked to UPI, a feature that has supported adoption. RuPay-linked transactions now account for almost 20% of credit-card transactions.

In the debit-card segment, RuPay has more than 85% market share. However, traditional debit-card usage outside ATM withdrawals has declined as consumers increasingly use UPI for everyday payments.

This transition is significant for investors because it demonstrates how UPI is changing the economics and competitive landscape of India’s payments industry.

NPCI’s subsidiaries are expanding the digital payments footprint

NPCI operates through three major subsidiaries: NPCI International Payments Ltd (NIPL), NPCI BHIM Services Limited (NBSL) and NPCI Bharat BillPay Ltd (NBBL).

NBSL operates the BHIM consumer application, which has recorded rapid growth over the past year. NBBL connects billers and consumers for online utility payments through third-party payment applications.

Meanwhile, NIPL is focused on expanding UPI and NPCI’s international presence through partnerships with overseas central banks and commercial arrangements with foreign financial institutions.

The international expansion could provide another avenue for long-term growth as Indian payment technology gains wider acceptance outside the country.

What Does This Mean for Listed Companies?

NPCI is not itself listed, so investors cannot directly buy NPCI shares. However, its expanding payment infrastructure has indirect implications for banks and other digital-payment players. NPCI is a Section 8, not-for-profit company and includes major banks such as SBI, PNB, Bank of Baroda, ICICI Bank and HDFC Bank among its member banks.

Banks to Watch

• HDFC Bank  ₹687.00     ▼6.80  −0.98%
• ICICI Bank   ₹1,379.60  ▼4.90  −0.35%
• State Bank of India   ₹999.20  ▼10.50  −1.04%
• Axis Bank   ₹1,248.10   ▲2.10  +0.17%
• Kotak Mahindra Bank   ₹414.95  ▼1.60  −0.38%
• Bank of Baroda  ₹237.09  ▼0.53  −0.22%
• Punjab National Bank  ₹117.32 ▲0.47 +0.40%

Why Banks Matter

• UPI scale: UPI processed 24,161.69 crore transactions worth ₹314 lakh crore in FY26, with 703 banks live on the platform.
• Higher digital adoption: Continued UPI growth can support banks’ digital customer engagement and transaction ecosystems.
• Potential MDR: If a limited, threshold-based MDR is introduced, it could change the economics of high-value merchant UPI transactions. The government says ordinary users and P2P transactions would remain free.
• Technology investment: NPCI’s continued investment in payment infrastructure, cybersecurity and fraud prevention could benefit banks with strong digital capabilities.
• Not a direct earnings trigger: NPCI’s FY26 profit decline should not be interpreted as automatically negative for bank stocks. Bank valuations and earnings remain primarily driven by credit growth, NIMs, asset quality, provisions, deposits and capital.

What NPCI’s FY26 numbers mean for investors

The results present a mixed picture. On one side, NPCI continues to benefit from extraordinary growth in UPI usage, RuPay adoption and international expansion. On the other, FY26 shows that supporting this scale requires significant investment in technology and infrastructure.

Investors should therefore watch three developments in the coming months: whether UPI MDR is introduced, how payment infrastructure costs evolve and whether NPCI’s international businesses generate meaningful commercial growth.

For the wider market, the numbers reinforce a key theme: India’s digital payments industry is growing rapidly, but the next phase will increasingly depend on how efficiently companies and infrastructure providers can monetise that growth while keeping the ecosystem affordable for consumers and merchants.