Sebi Discusses New UPI Merchant Charges With NPCI as Brokers Flag Cost Concerns
- October 15, 2026
- Posted by: Harsh Piplani
- Category: News
The new UPI MDR framework from NPCI took effect on 15 Oct 2026. It charges 0.4% on specified person to merchant payments above Rs 2,000, capped at Rs 300 per transaction, which is reached at Rs 75,000. Capital market payments such as broker top-ups and mutual funds carry a lower 0.02% rate, also capped at Rs 300. Discount brokers fear the charge may exceed their brokerage income, and Sebi said it will examine their concerns.
Quick Answer
The new UPI MDR framework from NPCI took effect on 15 October 2026 and charges merchants 0.4% on specified person to merchant payments above Rs 2,000, with a cap of Rs 300 per transaction. Payments up to Rs 2,000 stay free, and capital market payments to brokers, stockbrokers and mutual funds carry a lower rate of 0.02%, also capped at Rs 300. Discount brokers have flagged that the charge could exceed their brokerage income, especially when client money is transferred and returned unused, and Sebi said it will examine these concerns. The merchant pays the charge and the customer is not billed directly, but the rules on pass through and on refunds are still open.
The UPI MDR is the first time a merchant discount rate has applied at scale to UPI, which has run as a free payment system for merchants since its launch. The headline is that Sebi is discussing the rate with NPCI because brokers say it hurts their business.
This guide explains the UPI MDR slabs, how the capital markets rate differs, what brokers are worried about and what investors should watch. I mark clearly where my sources are secondary or incomplete.
Click Here – Get Free Investment Predictions
UPI MDR Slabs: What Merchants Pay
| Payment type | UPI MDR | Notes |
|---|---|---|
| Person to merchant (P2M) up to Rs 2,000 | Nil | Over 95% of merchant volume, per NPCI |
| P2M above Rs 2,000, standard | 0.4% | Capped at Rs 300 per transaction |
| Railways, telecom, insurance, fuel and other notified categories | Flat Rs 5 | For payments above Rs 2,000 |
| Capital markets: mutual funds, brokers, dealers, investment platforms | 0.02% | Capped at Rs 300 per transaction |
| Small merchants on UPI QR codes | Nil | Up to Rs 1 lakh received a month |
| Person to person (P2P) | Nil | Free for consumers |
NPCI published the framework in FAQs dated 15 September 2026. Its examples show Rs 12 on a Rs 3,000 payment and Rs 200 on a Rs 50,000 payment. The Rs 300 cap applies at Rs 75,000 (my calculation: 300 divided by 0.4%).
The merchant pays the UPI MDR and may not pass it on to customers. UPI apps are barred from charging platform fees. NPCI says the revenue will fund technology, fraud prevention and a fund for small merchants, which is still to be finalised with the RBI within three months.
Risk: A Rs 300 cap helps large payments but 0.4% on a mid sized payment is still a real cost for a business that runs on thin margins.
Track brokerage and fintech stocks on the Univest Screener
Why Brokers Flag Cost Concerns Over the UPI MDR
| Concern | Why it matters |
|---|---|
| Charge on client top-ups | A broker receives client money by UPI, so the platform is the merchant and is billed |
| Money returned unused | Funds sent in and then withdrawn may attract the charge on each leg; this is an open question in my sources |
| Low brokerage model | Discount brokers earn little per order, so a fee on the funding payment can erase it |
| Pass through | The framework bars passing the charge to customers, so the broker absorbs it |
At 0.02%, a Rs 1 lakh top-up costs a broker Rs 20 and a Rs 10,000 top-up costs Rs 2 (my calculation). That looks small, but a client who adds funds many times in a month and trades rarely can cost more in UPI MDR than the broker earns. This is the core of the discount brokers’ argument.
A report dated 17 September 2026, citing Mint, says discount brokers fear the fees may exceed their brokerage income. A 24 September 2026 item says broker bodies approached the government and Sebi. The only Sebi position I found is that it will examine the concerns, with no decision or timeline.
Risk: I could not find a Sebi or NPCI statement on the outcome of the discussion, so the headline’s discussion stage may not have ended.
Download the Univest iOS App or Univest Android App to follow broker and market updates.
What the Capital Markets Rate of 0.02% Means for Investors
| Payment | UPI MDR at 0.02% | Source status |
|---|---|---|
| Rs 50,000 payment | Rs 10 | Secondary summary |
| Rs 1 lakh payment | Rs 20 | Secondary summary |
| Rs 15 lakh and above | Rs 300 cap | My calculation: 300 divided by 0.02% |
| IPO mandate approval | No extra charge, per posts | Unverified, social posts |
| SIP through UPI AutoPay | Reportedly exempt | Unverified, based on an NPCI FAQ as read in posts |
| One time mutual funds payment by UPI | Falls under the capital markets rate | Secondary summary |
The investor is not charged directly under the UPI MDR. The risk for an investor is indirect, because a broker may change its fee structure, such as adding a charge for UPI funding, if the cost builds up. Zerodha lists UPI and IMPS funding as free today, with net banking at Rs 9, and that is the current pricing and not a response to the new rule.
Two points need checking with your broker. First, whether the UPI MDR applies to the return of money from the broker to the client. Second, whether a recurring UPI AutoPay SIP is exempt, as some posts say.
Risk: The posts I used for the SIP and IPO points are not official, so confirm them with NPCI or your broker.
UPI MDR in Context: Cards and Volumes
| Item | Figure |
|---|---|
| Credit card MDR | 1.5% to 2.5% |
| Debit card MDR | Up to 0.90% |
| UPI MDR, standard P2M | 0.4%, capped at Rs 300 |
| UPI transactions, August 2026 | 24.51 billion, worth Rs 29.82 lakh crore |
| UPI turned | 10 years old in August 2026 |
Against a credit card, the UPI MDR is much lower, which is why NPCI describes the UPI MDR framework as modest. A UPI and Services Steering Committee headed by NPCI decides the parameters and how fees are shared. One AI assisted page says banks get a proposed 40% share, but I could not confirm it.
Risk: A framework set by a steering committee can change, and any later increase in the UPI MDR would hit small businesses first.
What to Watch Next on the UPI MDR
- Any Sebi or NPCI statement on the broker concerns and the capital markets rate
- Clarity on whether refunds and withdrawals attract the UPI MDR
- Whether discount brokers add a fee for UPI funding
- The small merchant fund that NPCI is finalising with the RBI
- UPI volumes in September and October 2026 data
Conclusion
The UPI MDR is now live, and for most customers nothing changes. The open question is the cost for discount brokers, and Sebi’s review will decide if the capital markets rate stays at 0.02%.
Disclaimer: Data and figures in this article are sourced from publicly available information. These may or may not be accurate. Please verify all data with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).
Frequently Asked Questions
What is the new UPI MDR?
Ans. It is a merchant discount rate of 0.4% on specified P2M UPI payments above Rs 2,000, capped at Rs 300 per transaction, from 15 October 2026.
Is UPI free for customers now?
Ans. Yes for customers. P2P payments are free and the merchant pays the charge, which may not be passed on to the customer.
What is the UPI MDR for brokers and mutual funds?
Ans. NPCI set 0.02% for capital market payments, capped at Rs 300 per transaction.
Why are brokers worried about the UPI MDR?
Ans. Discount brokers say the charge may exceed their brokerage income, especially when client money is sent in and returned unused.
What did Sebi say?
Ans. The reports I found say Sebi will examine the brokers’ concerns. I found no decision or timeline.
When does the Rs 300 cap apply?
Ans. At Rs 75,000 for the standard 0.4% rate, and at about Rs 15 lakh for the 0.02% capital markets rate (my calculation).
Are payments up to Rs 2,000 charged?
Ans. No. Payments up to Rs 2,000 are free, and NPCI says this covers over 95% of merchant volume.
Is this article investment advice?
Ans. No. It is educational and not a recommendation to buy or sell.
