A new merchant discount rate (MDR) of 0.02 per cent on capital market transactions takes effect on October 15, according to reports from Banking Standard. This nominal fee comes with a maximum cap of ₹300 per transaction, making UPI more expensive for large fund transfers by stock brokers. Netbanking transactions, however, maintain a flat fee of ₹8 to ₹12 per transaction, negotiated between banks and payment processing partners. The Finance Ministry reports that 96% of all merchant (P2M) UPI transactions will be unaffected by the new charges altogether, with capital markets specifically getting a rate 20x lower than the standard merchant rate.
For a ₹1 lakh transaction, the new UPI MDR will incur a fee of ₹20 for brokers, which is more expensive than netbanking's average cost of ₹8 to ₹12 for the same amount. As reported by Banking Standard, the per-transaction UPI limit is set at ₹5 lakh and the per-day limit at ₹10 lakh for capital market payments. However, NPCI has clarified that recurring SIP payments through UPI AutoPay or UPI Mandate will not attract any MDR at all, since these transactions sit outside the new pricing structure. For larger investments, even a ₹15 lakh lump-sum investment is capped at ₹300 - less than the price of a large pizza, according to recent reports.
In August alone, 84.12 million UPI transactions were recorded with a cumulative value of ₹63,667.21 crore under the securities brokers and dealers' category, according to Banking Standard data. However, many users have enhanced their limits to ₹5 lakh but still transact under ₹1 lakh, making netbanking more attractive for larger transfers. The preference for UPI remains strong due to customer preference and muscle memory, sources noted. Most investors are unaffected by the new MDR changes, as 96% of all merchant UPI transactions will remain fee-free, with the impact primarily affecting high-frequency active traders and large-sum investors.
According to Banking Standard, netbanking could become lucrative for brokers as fees can be passed on to customers, unlike UPI MDR costs. Kamlesh Shroff, President of Association of NSE Members of India (ANMI), stated that while UPI offers speed and convenience, brokers will evaluate the economics of different payment channels as this becomes a recurring operating cost. The unique challenge for broking is that clients can transfer funds multiple times without executing trades, while payment costs are incurred each time. Zero-commission platforms like Zerodha and Groww built their entire business model around thin-to-zero transaction margins, subsidized by a free payment rail, making this cost recovery particularly significant for them.
The National Payments Corporation of India (NPCI) is developing Netbanking 2.0 through its Bharat Connect platform, expected to bring standardisation to the netbanking ecosystem across different banks and payment aggregators, as reported by Banking Standard. Most brokers in India have healthy balance sheets and can offset marginal costs levied on UPI transactions, according to a third source from the payments industry. The government's decision to end the zero-MDR era, which has been in place since January 2020, signals a shift toward more sustainable payment infrastructure funding while maintaining protection for retail investors in capital markets.
