UPI Charges: Will Mutual Fund Investors Be Affected?
No
Direct Cost for Investors... But a New Cost for Mutual Fund Companies!
S.Sridharan, CEO & and Principal Officer, https://www.walletwealth.co.in/
SEBI
Registered Investment Advisor-INA000020998
“Will I have
to pay a UPI charge even for my ₹5,000 SIP?” Ravi asked his friend.
“I heard
that UPI transactions are going to attract charges. Will an additional amount
be deducted from my monthly investment?” he asked.
This is a
concern that many mutual fund investors may have. However, a closer look at the
new rules makes one thing clear: the MDR is not to be directly charged to
the investor.
From October
15, 2026, Merchant Discount Rate, or MDR, will apply to certain UPI merchant
transactions. For specified general merchant transactions above ₹2,000, the MDR
can be up to 0.4%. However, for transactions involving mutual funds,
securities, stockbrokers and dealers, among others, a much lower MDR of 0.02%, subject to a
maximum of ₹300
per transaction,
has been specified.
Will Investors Have to Pay the Charge?
This is the
most important question.
MDR is not a
charge that is directly collected from the customer. It is a cost borne on the
merchant or service-provider side. The Central Government has clarified that
the MDR should not be passed on directly to customers making UPI payments.
Therefore,
investors need not worry that an additional ₹1 will automatically be deducted
from a ₹5,000 SIP simply because the payment is made through UPI.
How Much Is the MDR on a ₹5,000 Investment?
At 0.02%,
the MDR is relatively small.
|
UPI
Investment Amount |
0.02%
MDR |
|
₹5,000 |
₹1 |
|
₹10,000 |
₹2 |
|
₹50,000 |
₹10 |
|
₹1
lakh |
₹20 |
|
₹5
lakh |
₹100 |
|
₹10
lakh |
₹200 |
|
₹15
lakh |
₹300 |
|
₹20
lakh |
₹300* |
*₹300 is the
maximum MDR applicable per transaction.
So, while
the MDR calculation for a ₹5,000 transaction works out to just ₹1, that amount is not to
be directly recovered from the investor under the stated framework.
What About SIP Investors?
Investors
who regularly invest ₹1,000, ₹2,000 or ₹5,000 every month through SIPs are
unlikely to face any significant direct impact from the new arrangement.
UPI AutoPay
and other recurring-payment mechanisms have made it easier for investors to
continue their SIPs without manually initiating every payment.
According to
current reports, recurring investment transactions through UPI AutoPay are also
expected to remain outside the scope of the new MDR. The exact treatment,
however, can depend on the payment arrangement and the applicable operational
framework.
Therefore,
SIP investors do not need to rush into stopping their SIPs or abandoning UPI
simply because of the new MDR rules.
Lump-Sum Investments Could See a Relatively Larger
Impact
The impact
may be more noticeable when investors make large lump-sum investments through
UPI.
Suppose an
investor makes a one-time mutual fund investment of ₹5 lakh. At 0.02%, the MDR
works out to ₹100.
For a ₹15
lakh transaction, it works out to ₹300. Even if the investment amount is
higher, the MDR is capped at ₹300 per transaction.
However, the
important point remains that this cost is not to be directly added to
the investor's investment amount as a customer charge.
So, Who Will Bear the Cost?
This is the
more important question for the mutual fund industry.
Mutual fund
companies, investment platforms, payment service providers, registrars and
other entities involved in the transaction chain may have to absorb the cost,
depending on how the payment arrangement is structured.
For a single
transaction, ₹1 or ₹2 may appear insignificant. But when millions of digital
transactions take place across the industry, even a small charge per
transaction can add up to a substantial overall cost.
Therefore,
the new MDR could have a greater impact on the cost structure and
payment economics of mutual fund companies and digital investment platforms than on individual
investors.
What Should Investors Do?
Investors do
not need to make a hasty change to their investment strategy merely because of
the new UPI MDR rules.
They should
keep three points in mind.
First, the specified MDR
for UPI transactions involving mutual funds and other capital-market-related
transactions is 0.02%.
Second, the MDR is capped
at ₹300
per transaction.
Third, the MDR is not
meant to be directly passed on to the customer as a UPI payment charge.
The Bottom Line
News about
UPI charges may initially cause concern among mutual fund investors. But when
the applicable rate of 0.02% and the ₹300 cap are considered, the direct financial
impact on investors making regular, small-value investments is expected to be
limited.
Therefore,
investors should not change their investment strategy simply because they hear
that “UPI charges are coming.”
Instead, the
important questions are: Who bears the charge? How much is it? And
which type of transaction does it apply to?
Understanding
these details is more important than reacting to the headline.
Note: The 0.02% MDR and ₹300
maximum limit for UPI transactions involving capital-market-related entities are based on the
officially announced framework. The treatment of specific payment arrangements
should be checked against the latest operational guidelines applicable from
October 15, 2026.
For more details and Investing
S.Sridharan, CEO & and Principal Officer, https://www.walletwealth.co.in/
SEBI
Registered Investment Advisor-INA000020998
If you need any advice on investments, do call us at 9940116967.
Team Wallet Wealth,
AMFI Registered Mutual Fund Distributor
2nd Floor, No.8A, 2nd Main Road,
Nanganallur,
Chennai – 600 061
Ph: 044-48612114
https://www.walletwealth.co.in/
Email id: sridharan@walletwealth.co.in
ARN
173466
You can contact Mr.S.Sridharan for all types of investments
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Read articles written by Mr. S. Sridharan in Nanayam Vikatan, a
leading personal financial management magazine https://www.vikatan.com/author/855-sridharan-s
Buy
“Neengalum Kodeeswarar Aagalam!” (நீà®™்களுà®®் கோடீஸ்வரர் ஆகலாà®®்!
தமிà®´்), written by Su.
Sreedharan and published by Vikatan Publications. https://books.vikatan.com/personal-finance-and-business/neengalum-kodeeswarar-aagalam
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