UPI MDR: Will mutual fund SIPs, stocks get costlier? Brokerages, experts explain impact on investors

The new Merchant Discount Rate (MDR) framework for select UPI transactions is unlikely to materially alter the economics of retail investing through mutual funds or stocks, according to Jefferies. However, the eventual impact on investors will depend on whether intermediaries such as brokers, mutual fund platforms and AMCs absorb the cost or pass it on to customers.

From October 15, 2026, select Person-to-Merchant (P2M) UPI transactions above ₹2,000 will attract MDR. The standard rate for eligible transactions will be 0.4%, with a maximum charge of ₹300. However, capital-market transactions have been placed in a separate category and will attract a much lower MDR of 0.02%, capped at ₹300 per transaction.

Mutual fund SIPs

For mutual fund investors, the distinction between one-time payments and recurring mandates is particularly important. Mutual fund SIPs set up through UPI AutoPay or recurring mandates will not attract the prescribed MDR on the automated transaction. Therefore, existing monthly SIPs linked to UPI AutoPay can continue without the new MDR being automatically added to each instalment.

However, eligible one-time mutual fund purchases made through UPI will fall under the separate capital-market MDR category. At 0.02%, the absolute cost remains relatively small. A ₹5,000 investment would translate into an MDR of ₹1, while a ₹10,000 transaction would imply ₹2, assuming the entire cost is passed on.

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Jefferies on impact of UPI MDR on retail investing

Jefferies said the new framework is unlikely to significantly change the economics of retail investing through SIPs or stocks. Its analysis focuses primarily on the revenue opportunity for payment companies, which it estimates at ₹150–180 billion, rather than forecasting a direct increase in investment costs for retail investors.

Stock investments

For stock market investors, the 0.02% capital-market MDR will apply to eligible UPI payments. A ₹50,000 stock purchase, for example, would imply an MDR of ₹10 at the prescribed rate, while larger transactions will be subject to the ₹300 cap.

Dhiraj Relli, MD & CEO, HDFC Securities, said the separate treatment for capital-market transactions is significant. “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.”

Impact for stockbroking clients

Relli said the practical impact on stockbroking clients should remain limited. “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.”

UPI MDR impact on mutual funds and stock investments

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Concern for brokers

Zerodha founder Nithin Kamath, however, has raised a concern specific to broking. “As brokers, we can’t force a customer to trade after transferring money,” he said, pointing out that brokers could incur an MDR even when money transferred to a trading account does not result in a transaction. Kamath said a cap of ₹5 or ₹10 per transaction would be more reasonable for broking than a ₹300 cap.

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Will customers have to pay UPI MDR?

The broader framework also keeps customers from being directly charged MDR. NPCI has clarified that the applicable MDR will be borne by merchants and cannot be passed on as a separate UPI charge to consumers. Person-to-person transactions will remain free, while UPI P2M transactions up to ₹2,000 will continue to carry zero MDR.

Relli said the calibrated treatment of capital markets is aimed at preserving retail participation. “As an industry, we should read this not as a new cost, but as a considered decision to protect retail access to markets.”

What investors need to know

For investors, therefore, the key takeaway is that the new rules do not impose a blanket charge on mutual fund SIPs or stock investments. UPI AutoPay-based recurring investments remain outside the prescribed MDR, while eligible one-time capital-market payments carry the lower 0.02% rate. The eventual cost to investors will depend on whether intermediaries absorb the charge or pass it through.

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