UPI merchant fee may add just Rs 2 a year per Rs 1 lakh to mutual fund costs

From 15 October, mutual fund houses will bear UPI merchant charges on investor transactions. Even if passed on, the estimated annual impact is about Rs 2 per Rs 1 lakh—far below the potential savings from moving from regular to direct mutual-fund plans.

— Source publishedFri, 18 Sept, 2026, 19:13 IST·First seen Fri, 18 Sept, 2026, 19:20 IST·Source Times of India · Business

What happened

UPI merchant fees from 15 October will be paid by mutual fund houses, not investors, with an estimated Rs 2 yearly impact per Rs 1 lakh if passed through. The

Key facts

  • Rs 24 charge on Rs 1 lakh UPI mutual-fund transfer
  • Rs 2 estimated annual cost per Rs 1 lakh if passed through
  • 2.07% regular flexi-cap expense ratio (Rs 2,065 per Rs 1 lakh)
  • 0.86% direct-plan expense ratio (Rs 860 per Rs 1 lakh)
  • Rs 1,205 annual saving per Rs 1 lakh by switching
  • 0.18% UTI Nifty 50 Index direct-plan expense ratio
  • 0.05% expense ratio for some index funds
  • Rs 100 transfer charge on Rs 5 lakh broker margin
  • Rs 20,000 crore annual government support

Why this matters

The policy creates a modest new payments-cost line for fund houses but is unlikely to alter mutual-fund distribution economics or trigger meaningful strategic consolidation.

What to watch

  • SEBI guidance on whether and how UPI merchant charges may be included in scheme expenses.
  • NPCI, bank, or payment-aggregator revisions to merchant discount rate structures, transaction caps, or exemptions.
  • AMC disclosures of payment-processing expenses or changes in direct-plan and regular-plan expense ratios after 15 October.
  • A shift in investor payment behavior from one-time UPI purchases toward mandate-based SIPs or alternative rails.
  • Whether distributors use the issue to contrast negligible UPI costs with the much larger long-term cost gap between regular and direct plans.
  • AMCs are likely to communicate that the charge has immaterial impact rather than introduce separate investor-facing fees.
  • Large AMCs may use low-cost direct-plan messaging to emphasize that plan selection and expense ratios outweigh payment-method costs.
  • Digital investment platforms may promote UPI AutoPay, mandates, and consolidated transaction flows to reduce per-payment processing costs.
  • Smaller AMCs and high-frequency SIP platforms may review payment-routing economics, especially for small-ticket transactions.