Sebi discusses new UPI merchant charges with NPCI as brokers flag cost concerns
India’s markets regulator is in talks with the National Payments Corporation of India (NPCI) over the newly introduced merchant discount rate (MDR) on certain UPI transactions, including those involving capital-market participants, as stockbrokers warn that the charges could raise their costs.
“NPCI has just issued a statement, and we are still in talks with them,” Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey said at an event on Thursday.
MDR is a fee charged to merchants on certain digital payment transactions, with the proceeds distributed among participants in the payments ecosystem, including banks and payment service providers.
The new framework mandates an MDR of 0.4% on person-to-merchant (P2M) UPI transactions above ₹2,000. For transactions of ₹75,000 and above, the fee is capped at ₹300 per transaction. Capital-market transactions involving mutual funds, securities and brokers will attract a lower MDR of 0.02%, also subject to a cap of ₹300.
The charges, initially scheduled to take effect on 15 October, have been postponed until after Diwali.
Stockbrokers have made representations to Sebi and the central government, seeking a reconsideration of the charges. Their concern is that money transferred into a trading account does not necessarily result in a trade. Investors may transfer funds and leave them unused, while brokers still incur payment-related costs without earning brokerage revenue.
The charges pose a particular challenge for brokers accepting UPI payments from investors. Under Sebi rules, registered brokers must use valid UPI handles and display them on their websites to ensure investors transfer money only to verified accounts. Brokers fear the MDR on these transactions could exceed the brokerage revenue generated from the trades they facilitate.
Mint reported on 2 October that brokers were considering levying additional charges on customers to offset the cost of MDR.
Apoorva is a Mumbai-based journalist at Mint who covers the Securities and Exchange Board of India (SEBI), tracking the pulse of India’s capital markets, regulatory developments and the people who operate within them. She holds a postgraduate diploma in business and financial journalism from the Asian College of Journalism, where she developed a strong foundation in markets, companies, and economic policy. She began her journalism journey with an internship at Bloomberg, where she worked across beats such as real estate, infrastructure, capital markets, and deals, which helped her understanding of business and finance.<br><br>She is guided by the belief that everything in this world can be explained in simple and fewer words, and that idea shapes how she approaches her writing. She aims to cut through complexity and present nuanced regulatory and financial developments in a way that is both accessible and meaningful to readers.<br><br>When she is not tracking market chatter, Apoorva can usually be found deep into a fiction novel or out on a long run. She is also a trained classical dancer in Bharatanatyam, Mohiniyattam, and Kathakali.
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