Archive · 11 Aug 2026
Will UPI MDR add extra cost to your monthly SIPs?
Some grown-ups save money a little at a time by putting it into something called a mutual fund.
They can pay for this using UPI, a phone app that moves money from their bank account.
Right now, using UPI for these payments is usually free.
The government in India is thinking about letting companies charge a small fee, called MDR, for some UPI payments.
MDR is a fee the shop or company pays for each digital payment it receives.
If this fee is introduced, the company taking your money might pay it, or they might ask you to pay it.
Even a very small fee can add up when you make a payment every month for a whole year.
Experts say people who invest a small amount every month could feel this more than people who invest a big amount just once.
The rules are not final yet, so nothing has been decided.
The government has created an enabling framework under which a Merchant Discount Rate (MDR) on UPI transactions could be introduced, though final rules and transaction categories are yet to be clarified.
Experts say MDR is a payment-processing cost paid by the merchant and would not automatically increase a mutual fund's expense ratio.
At a hypothetical 0.5% MDR, an investor would pay ₹25 per monthly SIP instalment, or ₹300 over 12 months, while a ₹1 lakh lump-sum investment would incur ₹500.
Under the proposed ₹2,000 threshold, UPI payments above that amount, including certain SIP and lump-sum investments, could potentially fall into the chargeable category, experts said.
Geojit Investments' Dr VK Vijayakumar estimated around 45% of new SIPs could be impacted, while UPI's share of lump-sum investments is low at around 10%.
- Who
- Mutual fund investors paying through UPI, along with AMCs, brokers, distributors and wealth platforms; experts quoted include Siddharth Maurya, Protima Dhawan, Shams Tabrej and Dr VK Vijayakumar.
- What
- The government has created an enabling framework that could introduce Merchant Discount Rate (MDR) fees on UPI transactions, potentially adding costs to monthly SIPs and lump-sum mutual fund investments.
- When
- Recently, after the government created the enabling framework; final rules and applicable transaction categories are yet to be clarified.
- Where
- India, where UPI is used for mutual fund payments.
- Why
- To enable charging MDR on UPI payments under a new framework; the payment-processing cost could be absorbed by AMCs or intermediaries or passed on to investors, affecting investment costs.
- What is MDR
- Merchant Discount Rate: a fee charged for processing digital payment transactions, paid by the merchant
- Proposal status
- Enabling framework created; final rules and transaction categories yet to be clarified
- Hypothetical MDR rate
- 0.5%
- SIP cost at 0.5% MDR
- ₹25 per instalment; ₹300 over 12 months
- Lump-sum cost at 0.5% MDR
- ₹500 on a ₹1 lakh investment
- Proposed threshold
- UPI transactions above ₹2,000 could potentially be chargeable
- Estimated impact
- Around 45% of new SIPs; lump-sum UPI share is low at about 10%
- Alternative payment modes
- NEFT, RTGS and net banking