What happened
NPCI announced UPI MDR of 0.4% on P2M transfers above ₹2,000 and 0.02% for capital-market transactions effective October 15, 2026.
SEBI Chairperson Tuhin Kanta Pandey said the regulator will examine broker and AMC concerns on the new UPI merchant discount rate framework, which takes effect October 15. NPCI announced MDR of 0.4% on person-to-merchant transfers above ₹2,000, capped at ₹300, while capital-market transactions face 0.02% capped at ₹300 per trade.
Brokers argue the charge ignores that UPI fund transfers don't always generate trades, turning a regulatory compliance cost into a recurring crore-scale burden. Zerodha CEO Nithin Kamath proposed a ₹5-10 per-transaction cap for broking payments, illustrating how 10,000 customers making 50 UPI transfers of ₹2 lakh each without a single trade could cost a broker ₹2 crore monthly.
SEBI's quarterly settlement rules compound the problem: brokers must return unused client funds monthly or quarterly, with over half of those reversals flowing back through UPI, meaning the MDR hits them on money they never earned.
Timeline
- September 12, 2026 — SEBI Chairperson Pandey comments at NaBFID Conclave in Mumbai.
- September 15, 2026 — NPCI announces UPI MDR framework.
- October 15, 2026 — New MDR framework takes effect.
Why it matters for me
Brokers face recurring crore-scale MDR costs on fund flows that don't generate trades, with SEBI's quarterly settlement rules compounding the impact.
Money
Brokerage Traders
New UPI MDR of 0.4% on P2M transfers above ₹2,000 and 0.02% on capital-market transactions creates recurring costs for brokers on fund flows that don't generate trades.
Work
Finance Professionals
SEBI's quarterly settlement rules combined with MDR mean brokers absorb costs on client fund reversals that exceed 50% of the flow back through UPI.
Daily Life
Retail Investors
Recurring UPI mandates like mutual fund SIPs are excluded from MDR, protecting retail investors from direct charges on their automated payments.
What to remember
SEBI will hear industry concerns — ₹5-10 cap proposed vs ₹300, SIPs excluded, 50%+ reversals flow through UPI.
SEBI to examine broker and AMC concerns on UPI MDR: 0.4% P2M rate, 0.02% capital-market rate, ₹5-10 cap proposed by Zerodha.
Verified sources (8)
SEBI to hear broker and AMC concerns on MDR
↗SEBI to examine stockbrokers' concerns over new UPI MDR
↗SEBI to look into broker, AMC concerns over UPI MDR: Tuhin Kanta Pandey
↗SEBI to examine brokers' concerns over UPI merchant charges
↗SEBI to hear brokers' concerns over UPI MDR charges and trading account transfers
↗SEBI to look into concerns over new UPI charges: Tuhin Kanta Pandey
↗SEBI may review brokers' concerns over MDR on large UPI fund transfers
↗SEBI to look into stockbrokers' concerns over UPI MDR framework: Chairman
↗Claims and linked sources
12 claimsSEBI will hear broker and asset management companies' concerns regarding the merchant discount rate on UPI transactions.
SEBI Chairperson Tuhin Kanta Pandey said SEBI will look into the issues raised and see how they can be eased, speaking at the NaBFID Infrastructure Conclave 2026 in Mumbai on September 12, 2026.
NPCI announced an MDR of 0.4% on person-to-merchant UPI transactions above ₹2,000, capped at ₹300 for transactions of ₹75,000 and above, effective October 15, 2026.
For capital-market transactions, including payments to stockbrokers, securities, dealers, mutual funds and investment advisors, the MDR is set at 0.02% capped at ₹300 per transaction.
Recurring standing instructions or UPI mandates, such as those for mutual fund SIPs, are excluded from the MDR charge.
Brokers have raised concerns that the MDR could disproportionately increase their costs because a client fund transfer via UPI does not necessarily result in a trade or generate brokerage revenue.
Zerodha founder and CEO Nithin Kamath has suggested a much lower cap of ₹5-10 per transaction for broking-related UPI payments rather than the proposed ₹300 cap.
SEBI's quarterly settlement rules require brokers to return unused client funds to clients every month or quarter; more than half of the subsequent transfers back to broking accounts happen via UPI, accentuating the MDR cost impact.
Uttam Bagri, MD of BCB Brokerage, argues that treating stockbrokers as merchants for MDR is misplaced because brokers are pass-through entities, with client funds flowing to clearing corporations for margins and settlement.
The BSE Brokers' Forum has also taken up the MDR matter with the SEBI regulator.
Kamath shared an illustrative example in which 10,000 customers making 50 UPI transfers of ₹2 lakh each in a month without executing a trade could cost a broker around ₹2 crore under the proposed MDR framework.
Several brokers flagged that the new charge would become a recurring operating cost running into crores without generating any trade or revenue for the broker.