Business EconomyPosted at: Sep 17 2026 2:06PM


SEBI to examine stockbrokers' concerns over new UPI MDR

New Delhi, Sep 17 (UNI) The Securities and Exchange Board of India (SEBI) will examine concerns raised by stockbrokers over the Merchant Discount Rate (MDR) being introduced on certain UPI transactions, SEBI Chairman Tuhin Kanta Pandey said on Thursday. The move comes as brokers assess the potential impact of the new payment cost on their business models.
“There are some important issues there. We will certainly look into it and see how we can ease them,” Pandey said on the sidelines of the NaBFID Infrastructure Conclave 2026.
The concerns follow the National Payments Corporation of India’s (NPCI) decision to introduce MDR on select UPI merchant transactions from October 15, 2026. Under the new framework, capital-market transactions, including payments involving stockbrokers, securities dealers and mutual funds, will attract an MDR of 0.02%, subject to a maximum charge of Rs 300 per transaction.
The broader UPI framework provides for a 0.4% MDR on eligible person-to-merchant transactions above Rs 2,000, with the fee capped at Rs 300 for transactions of Rs 75,000 and above. Person-to-person transfers and UPI payments up to Rs 2,000 remain outside the MDR framework.
For the stockbroking industry, however, the issue is less about the headline rate and more about how the charge is applied. Under SEBI's investor-protection framework, registered stockbrokers are required to provide valid UPI handles so investors can transfer funds to verified accounts.
Brokers have pointed out that a UPI payment into a trading account does not necessarily lead to an actual trade. An investor may add money to the account and leave the funds unused. In such a situation, the broker could incur a payment-processing cost even though no brokerage income is generated from the transaction.
The cost could become more significant when funds move repeatedly between investors and brokerage accounts. Under SEBI's settlement framework, unused client funds have to be periodically returned to investors. If the same money is subsequently transferred back into the trading account through UPI, another payment transaction could trigger an MDR-related cost.
This creates a potential mismatch between the cost incurred by a broker and the revenue earned from the customer's trading activity. The concern is particularly relevant for discount brokers and other businesses operating on relatively low brokerage margins.
The issue has already drawn attention from industry participants, with brokerages flagging the possibility that repeated fund transfers could increase their operating expenses.
SEBI's decision to examine the matter could therefore lead to further discussions with NPCI and other stakeholders over how UPI charges should apply to capital-market fund transfers.
The new MDR regime is scheduled to begin on October 15. While the framework is designed to create a commercial mechanism around higher-value merchant payments, the treatment of transactions linked to investment accounts has emerged as a specific concern for the securities industry.UNI VK AAB
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