From October 15, 2026, UPI payments to stockbrokers, securities dealers and mutual funds will carry a merchant discount rate (MDR) of 0.02%, capped at ₹300 per transaction. A widely shared post says SEBI announced this and that it will make funding your trading account more expensive. Neither part is quite right. Here is who actually set the rule, who pays, and why brokers are worried.
What was actually announced
- The finance ministry notified the UPI MDR framework on September 14, 2026. It is a government notification, not a SEBI rule.
- NPCI's UPI and Services Steering Committee decides the exact rate for each merchant category.
- For capital markets, meaning payments to stockbrokers, securities dealers and mutual funds, the rate is 0.02% with a cap of ₹300 per transaction, effective October 15.
- On a ₹1 lakh payment, that works out to ₹20.
- Person to person payments and payments up to ₹2,000 stay outside the MDR framework, and recurring payments such as SIPs are reported as unaffected.
SEBI's role is different. Its chairman, Tuhin Kanta Pandey, has said the regulator will look into the concerns brokers have raised, but no change to the capital markets MDR structure has been decided so far.
Who actually pays the charge
MDR is a fee inside the merchant payment system. Customers do not pay it directly, and in this case the merchant is the broker or fund house receiving your money. The costs are then split between banks, payment aggregators and apps.
So "UPI will cost you more" is not what the notification says. What is still unknown is how brokers will respond. They could absorb the cost, change other pricing, or push clients toward other ways of adding funds. Zerodha's Nithin Kamath has said brokers cannot simply pass this charge on to customers, but no broker has yet announced its plan.
Why brokers are worried
The concern is not the rate itself. Kamath has said having an MDR is okay and probably inevitable. His objection is that money moving into a broking account does not guarantee a trade, so the broker pays the charge whether or not it earns any brokerage.
SEBI's own settlement rules make this worse. Brokers are required to return unused client funds at regular intervals. If a client then sends that money back through UPI, it is a fresh chargeable payment, with no trade behind it. Kamath's illustration: 10,000 customers each making 50 UPI transfers of ₹2 lakh in a month without a single trade would cost a broker roughly ₹2 crore. The arithmetic holds, since that is 5 lakh transfers at ₹40 each.
His proposal is a 0.02% charge capped at ₹5 or ₹10 per transaction instead of ₹300. Broker groups have also asked for a flat fee instead of one tied to the transaction value.
This is not the first time regulation has reshaped how trading businesses earn money. SEBI's earlier derivatives curbs already reduced trading volumes and cut NSE's FY26 profit, as we explained in our NSE GMP and SEBI F&O rules analysis.
Will the ₹300 cap ever apply?
Not under today's limits, going by our own calculation. The NPCI limit for capital market payments is ₹5 lakh per transaction and ₹10 lakh per day. At 0.02%, a ₹5 lakh payment costs ₹100, so the ₹300 cap would only start to bind at ₹15 lakh. That is why brokers are focused on the repeated smaller transfers rather than the cap.
What to watch before October 15
- Whether SEBI's review leads to any change in the capital markets rate or cap before the rollout
- Announcements from your own broker on whether it will absorb the charge or change how it takes payments
- How recurring UPI AutoPay payments, such as SIPs, are treated once the rules go live
The reports we reviewed only mention payments to stockbrokers, securities dealers and mutual funds. They do not say how IPO application mandates through UPI are treated, so if you apply to IPOs regularly, it is worth checking with your broker.
For another recent SEBI decision that matters to IPO investors, see our explainer on the SEBI retail IPO quota proposal.
We checked the rate and cap against BusinessToday's report on the capital markets MDR, the notification details against its explainer on what the MDR means for customers, Kamath's remarks against Newsdrum's report, and SEBI's response against 5paisa's coverage. The UPI limits come from NPCI's category limit changes.
If you fund your account to apply for IPOs, you can follow open issues, dates and live premiums on our IPO GMP tracker.
Frequently Asked Questions
Will UPI payments to my broker cost me extra from October 15?
Not directly, according to reports. The 0.02% MDR, capped at ₹300 per transaction, is paid by the merchant, which here means the broker or fund house, not deducted from the customer. Whether brokers will absorb the cost or change their pricing has not been confirmed, and Zerodha's Nithin Kamath has said brokers cannot simply pass it on to customers.
Did SEBI announce the new UPI MDR on broker payments?
No. The finance ministry notified the UPI MDR framework on September 14, 2026, and NPCI's UPI and Services Steering Committee decides the rates for each category. SEBI's chairman has said the regulator will examine the concerns brokers have raised, but SEBI did not set this charge.
How much is the UPI MDR on a ₹1 lakh payment to a broker?
It is ₹20, since the rate is 0.02%. With the current NPCI limit of ₹5 lakh per transaction for capital market payments, the highest charge on a single payment would be ₹100, so the ₹300 cap would only apply to larger payments. Recurring SIP payments through UPI AutoPay are reported as unaffected.
Disclaimer: This article is for informational and educational purposes only and does not constitute financial or investment advice. IPOLyst is not a SEBI-registered investment advisor. The UPI MDR framework and how brokers respond may change before or after October 15. Please check your broker's official notices and consult a registered advisor for decisions about your investments.