UPI MDR could raise costs for low-fee mutual funds and brokerages

Proposed UPI merchant discount rates on transactions above ₹2,000 from 15 October could squeeze low-cost investment products, prompting mutual funds and brokers to consider passing payment costs to investors.

— Source publishedThu, 17 Sept, 2026, 12:57 IST·First seen Thu, 17 Sept, 2026, 13:03 IST·Source Mint · Money

What happened

UPI MDR charges above ₹2,000 could pressure low-cost mutual funds and brokers, potentially leading them to add investor fees. Capitalmind CEO Deepak Shenoy

Key facts

  • ₹2,000 transaction threshold
  • 15 October
  • 0.40% MDR
  • ₹5 insurance fee per transaction
  • 0.02% (2 bps) MDR for mutual-fund lumpsums and broker inflows
  • 10-20 bps index-fund management fees
  • ₹20 per ₹1 lakh broker UPI inflow
  • ₹2 suggested flat fee per transaction
  • ₹650 crore assets under management
  • 2% typical credit-card merchant charge

Why this matters

Payments infrastructure and fintech partners offering lower-cost collection rails could become more strategic as asset managers and brokers seek alternatives to percentage-based UPI charges.

What to watch

  • Final MDR notification language, especially merchant-category exclusions, fee caps and applicability to investment-platform payments.
  • NPCI, SEBI, AMFI and brokerage-industry responses before the proposed 15 October implementation.
  • Changes in broker and AMC payment pages: UPI surcharges, transaction limits, waived-fee thresholds or routing to mandate/net-banking options.
  • UPI share of mutual-fund lump-sum inflows and brokerage account funding after any rollout.
  • Margin commentary from discount brokers, direct-plan platforms and index-fund-focused AMCs.
  • Consumer complaints or competitive moves by large platforms choosing to absorb fees.
  • Introduce UPI payment fees, fee disclosures, or minimum transaction thresholds for one-time mutual-fund and brokerage payments above ₹2,000.
  • Promote alternatives such as eNACH/SIP mandates, net banking, RTGS/NEFT and direct bank-transfer rails as lower-cost funding methods.
  • Lobby NPCI, banks and policymakers for investment-category exemptions, fee caps or a flat per-transaction MDR.
  • Reduce acquisition incentives and cashback offers tied to UPI-funded investing.
  • Prioritize recurring SIP mandates over ad hoc UPI lump-sum flows, increasing the strategic value of mandate onboarding and retention.