It applies to UPI payments made for equity and debt investments, mutual fund purchases and broker wallet top-ups.

The government’s decision to levy Merchant Discount Rate (MDR) on UPI transactions above ₹2,000 for capital market-related payments is expected to alter payment behaviour among investors, though experts believe the long-term impact on investment activity will be limited.

The MDR framework covers regulated capital market entities, including mutual fund asset management companies (AMCs), SEBI-registered stockbrokers, securities dealers and investment platforms. It applies to UPI payments made for equity and debt investments, mutual fund purchases and broker wallet top-ups. The charge has been fixed at 0.02 per cent of the transaction value, capped at ₹300 per transaction. This means that for an investment of ₹10,000, one will have to pay ₹2.

NSE Managing Director and CEO Ashish Chauhan during a media briefing said the introduction of MDR could temporarily affect transaction volumes. “MDR on UPI transactions above ₹2,000 could have a short-term impact on transaction volumes. However, activity is expected to normalise over time as the market adjusts to the new fee structure,” he said.

SIP not to slip

Industry participants believe the move is unlikely to dent retail participation in mutual funds. Piyush Jhunjhunwala, Founder and CEO of Stockify, said investors may explore alternative payment modes but do not expect a significant impact on SIP flows.

“While some investors may consider alternative payment methods when faced with MDR fees, this possibility is not likely to affect SIP investment volumes unless MDR fees become prohibitively high or easily recurrent,” Jhunjhunwala said.

The comments come as SIP investments continue to scale new highs. In August, SIP contributions touched a record ₹32,297 crore, while the total number of SIP accounts crossed 10 crore, translating into an average contribution of around ₹3,230 per account.

Jhunjhunwala added that investors can easily switch to alternatives such as e-NACH, which enables automated bank debits for recurring investments. “New mandates can be created within a few working days to shift from UPI to bank debits,” he said.

Limited impact seen

According to Gibin John, Senior Investment Strategist at Geojit Investments, the larger impact may be on intermediaries rather than investors. “If mutual funds are classified under the merchant category, it could increase the cost of processing SIP and lump-sum investments through UPI,” he said.

John noted that the additional charge would typically be borne by receiving entities such as AMCs rather than investors directly. “As a result, the operating costs of AMCs may increase, which could indirectly affect investors over time,” he added.

Experts believe the new MDR regime could encourage a gradual shift from UPI to bank-based payment systems for investment transactions, while leaving overall capital market participation largely unaffected.

Published on September 15, 2026