icarious I still could not get PhonePe to work even after getting SMS to be auto-read. I ditched it anyway because YONO SBI lets you add multiple UPI accounts from different banks too. And PhonePe also has many more trackers. So, I didn't bother trying to check by installing it in the primary profile.
YONO SBI, however, started to read the UPI SMS after I installed Play Services and gave just Phone and SMS permission. If you're still facing issues, it might be due to the class-0 SMS messages. (Again, this is just my assumption. Doesn't hurt to check, I guess)
Before you switch to the profile containing YONO, try going to the 'Airtel alert' (the SIM toolkit app) -> Airtel now -> Start/Stop -> Stop. Once you do this, you should ideally not receive the flash messages after your UPI app sends an SMS.
Now, try switching to the profile with YONO and sandboxed play services, it should auto-read properly. Or at least, that's how I got it to work. You can also disable or uninstall Play Services after UPI registration.