1 hr ago
UPI MDR Keeps SIPs Free, Adds Small Costs to Investments
A new UPI payment rule treats investment payments differently from ordinary purchases.
Monthly mutual fund SIPs made through UPI AutoPay are not covered by the prescribed MDR.
One-time mutual fund investments and eligible stock payments through UPI can have a 0.02% MDR.
The charge is limited to ₹300.
For example, a ₹50,000 stock payment would create an MDR of ₹10 if the cost is passed on.
Customers cannot be separately charged an MDR as a UPI fee.
However, brokers and other intermediaries may decide whether to absorb the cost or pass it through their own pricing.
HDFC Securities said the effect on stockbroking customers should be small.
Zerodha’s Nithin Kamath said brokers could still face costs when transferred money is not used for a trade.
Mutual fund SIPs using UPI AutoPay or recurring mandates will not attract the prescribed MDR.
Eligible one-time mutual fund purchases and stock payments through UPI will carry a 0.02% MDR, capped at ₹300.
A ₹5,000 one-time mutual fund investment would imply ₹1 in MDR, while a ₹50,000 stock purchase would imply ₹10 if passed on.
NPCI says merchants must bear MDR and cannot separately charge consumers; person-to-person transfers remain free.
Zerodha founder Nithin Kamath warned brokers may pay MDR when customers transfer funds but do not subsequently trade.
- Who
- Mutual fund investors, stock investors, brokers, payment companies, HDFC Securities, Zerodha, and the National Payments Corporation of India are affected or cited.
- What
- A UPI MDR framework sets a 0.02% rate, capped at ₹300, for eligible capital-market payments while excluding UPI AutoPay SIP instalments from the prescribed MDR.
- Where
- The rules apply to eligible UPI payments involving mutual funds, stocks, debt-market investments, and trading-account transfers.
- When
- The framework is discussed in the articles; Nithin Kamath’s quoted post was dated September 16, 2026.
- Why
- The framework distinguishes capital-market payments from other UPI transactions while seeking to preserve retail access to investments; brokers are concerned about paying MDR even when no trade follows.
Limited impact on investors
Potential costs for brokers
Effect on retail investing
Limited impact on investors
HDFC Securities and Jefferies said the framework is unlikely to significantly change the economics of retail investing, with SIPs excluded and one-time capital-market costs generally small.
Potential costs for brokers
Nithin Kamath said brokers may incur MDR when customers transfer money to trading accounts but do not go on to place a trade.
Appropriate cap
Limited impact on investors
HDFC Securities said the separate 0.02% capital-market category, capped at ₹300, represents calibrated treatment intended to preserve retail participation.
Potential costs for brokers
Kamath argued that a ₹5 or ₹10 cap would be more reasonable for broking transactions than the ₹300 cap.
Who ultimately bears the cost
Limited impact on investors
The framework prevents merchants from separately charging customers an MDR as a UPI fee, and intermediaries may absorb the cost.
Potential costs for brokers
The article says the eventual investor impact depends on whether intermediaries absorb the MDR or pass it through their own pricing.
Key facts
- UPI AutoPay SIPs
- No prescribed MDR applies to recurring mutual fund SIP instalments made through UPI AutoPay or recurring mandates.
- Capital-market MDR
- Eligible one-time mutual fund, stock, debt-market, and trading-account UPI payments carry a 0.02% MDR.
- Maximum MDR
- The capital-market MDR is capped at ₹300 per transaction.
- Investment example
- A ₹5,000 one-time mutual fund investment implies ₹1 in MDR, assuming the full cost is passed on.
- Stock example
- A ₹50,000 stock payment implies ₹10 in MDR at the prescribed rate.
- Consumer charging
- The National Payments Corporation of India says merchants bear MDR and cannot separately charge customers a UPI fee.
- Other UPI transactions
- Person-to-person transfers remain free, while eligible person-to-merchant transactions up to ₹2,000 carry zero MDR.
Quotes
Nithin Kamath
Founder of Zerodha
“The headlines around the new UPI charge have understandably focused on the 0.4% MDR, but what deserves equal attention is the decision to carve out capital market transactions into their own category at just 0.02%, capped at Rs. 300.”
businesstoday.in
“For stock broking clients in my view, the practical impact is minimal. SIPs set up through UPI AutoPay fall outside this framework entirely, and one-time transfers will carry a cost of a few rupees at most, never more than Rs. 300.”
businesstoday.in
Sources
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