Everydaything

Digital Payments & UPI

Search interest around India’s new UPI MDR has split into two very different audiences. One is shopkeepers and customers wondering if a ₹2,000 grocery bill just got more expensive. The other, smaller but fast-growing, is investors: people who fund their Zerodha, Groww, or INDmoney account through UPI and want to know if buying a mutual fund or topping up a demat account is about to cost more, plus what this means for the shares of listed payment companies like Paytm. Those two questions have almost nothing to do with the standard 0.4% merchant fee everyone else is reading about, so here’s the version that actually answers them.

Quick answer

No, funding your trading or demat account via UPI is not getting meaningfully more expensive. Capital-market UPI payments, mutual funds, securities, and stockbroking, get a concessional 0.02% MDR capped at ₹300 from October 15, 2026, a fraction of the standard 0.4% rate that applies to ordinary merchant payments. UPI Autopay mandates used for SIPs are exempt entirely, so recurring SIP debits don’t attract this charge at all. Zerodha and INDmoney have both said they will absorb the new cost rather than pass it to customers, though Zerodha’s Nithin Kamath has publicly flagged that the current ₹300 cap could get expensive for brokers at scale and asked NPCI to lower it. Separately, listed fintech stocks like Paytm and MobiKwik rallied on the announcement, on the theory that MDR gives payment companies a new, if modest, revenue line, though how durable that reaction is remains an open question.

The capital-markets carve-out: what it actually is

The broader UPI MDR framework charges merchants 0.4% (capped at ₹300) on person-to-merchant payments above ₹2,000. But NPCI’s circular carves out a separate, much lower rate for the capital-markets category, covering equity, debt, and mutual fund transactions along with broker wallet top-ups. That rate is 0.02%, capped at ₹300 per transaction, roughly a twentieth of the standard charge. In practice that works out to about ₹1 on a ₹5,000 mutual fund purchase, ₹2 on ₹10,000, and ₹10 on a ₹50,000 stock purchase, with the ₹300 cap kicking in only on very large transfers. As with the standard framework, this fee is charged to the platform or broker receiving the payment, not deducted from the amount you invest.

Will Zerodha, Groww, or INDmoney pass this cost to you

The two brokers who have spoken publicly on this have both said the same thing: they intend to absorb the cost rather than charge customers. INDmoney co-founder Ashish Kashyap estimated that an investment app processing around ₹200 crore a day in UPI inflows would face roughly ₹4 lakh a day, about ₹11.52 crore a year, in MDR costs, and said INDmoney would absorb that rather than pass it on to investors.

Zerodha’s Nithin Kamath raised a more structural objection. Brokers, he pointed out, get charged MDR on every UPI transfer into a trading account whether or not that money ever turns into a trade, and SEBI’s mandatory periodic settlement rules force brokers to move client funds back and forth over UPI regardless of activity. His example: 10,000 customers each making 50 UPI transfers of ₹2 lakh in a month without placing a single trade could cost a broker roughly ₹2 crore in MDR with zero revenue to show for it. Kamath’s ask isn’t a higher rate, he’s supportive of MDR in principle, but a lower cap: keep the 0.02% rate but bring the cap down to ₹5–10 per transaction instead of ₹300, which would make the worst-case cost far more manageable. He has said Zerodha isn’t planning to shift the cost to customers, but has also been direct that absorbing an uncapped-in-practice cost “indefinitely” isn’t realistic if the framework doesn’t change. Groww has not issued a comparable public statement as of this writing.

Does UPI Autopay for SIPs get costlier

No. Recurring UPI Autopay mandates, the mechanism most mutual fund SIPs use for their monthly debit, are exempt from MDR entirely under the current framework. That exemption applies regardless of the SIP amount. It’s only one-time, manual UPI payments, topping up a demat account, buying a mutual fund lump sum, or placing funds for a trade, that fall under the 0.02% capital-markets rate, and even there the cost is small enough that most brokerages and AMCs are expected to absorb it rather than itemize it to you. Jefferies, in a note on the framework, called it “unlikely to significantly change the economics of retail investing through SIPs or stocks,” while HDFC Securities noted the separate, lower capital-markets rate reflects “a considered decision to protect retail access” to investing. Whether any platform eventually passes on the residual cost is still up to that individual broker or AMC, not something the MDR framework itself mandates.

Rate comparison: standard UPI vs. capital markets

Category	Threshold	MDR rate	Who pays
Standard merchant (P2M) payments	Above ₹2,000	0.4%, capped at ₹300	Merchant
Capital markets (mutual funds, securities, stockbroking)	Above ₹2,000	0.02%, capped at ₹300	Broker / platform
UPI Autopay / SIP mandates	Any amount	Exempt	N/A
Person-to-person transfers	Any amount	Exempt	N/A

How listed payment and fintech stocks reacted

Once NPCI’s September 16, 2026 circular confirmed the MDR framework, several listed payments stocks moved the same day, though not uniformly, and the moves are being read as a bet on future monetization rather than a certainty. One97 Communications (Paytm) rose as much as 7%, touching a fresh 52-week high near ₹1,855–1,856, with brokerages including JM Financial and Emkay Global raising price targets afterward on the view that MDR opens a new revenue line from UPI merchant volume that previously earned payment companies nothing. One Mobikwik Systems gained in a comparable 5–7% range the same day. Pine Labs was the outlier: reporting on its move has been inconsistent, with some coverage noting an early intraday gain that faded and other reporting showing the stock closing lower on the day, so its reaction is harder to characterize cleanly than Paytm’s or MobiKwik’s.

Multiple outlets covering these moves were careful to note that the link between the MDR announcement and the price action isn’t definitively proven, no article reviewed here claims the moves are caused solely by the MDR news, and analysts framed the rally as pricing in a monetization opportunity rather than reporting any actual revenue change yet. Separately, a sharp PB Fintech (Policybazaar) share decline later in September 2026 was driven by unrelated IRDAI proposals on insurance commission structures, not by UPI MDR, and shouldn’t be read as part of this story.

This article is for general information only. It is not investment advice, a research report, or a recommendation to buy, sell, or hold any security, including Paytm, MobiKwik, Pine Labs, Zerodha, Groww, or any other company or platform named here. Stock prices move on many factors at once, and past price reactions to a policy announcement are not a reliable guide to future performance. This is also not advice from a licensed financial advisor; consult a SEBI-registered investment adviser before making any investment decision.

Frequently asked questions

Does UPI MDR affect Zerodha or Groww users?

Only indirectly. UPI payments into capital-market accounts (stockbroking, mutual funds) attract a concessional 0.02% MDR capped at ₹300, far below the standard 0.4% rate, and this is charged to the broker or platform, not deducted from your investment. Zerodha and INDmoney have both said they plan to absorb this cost rather than pass it to customers, though Zerodha has asked regulators to lower the ₹300 cap given how the cost scales for brokers.

Will my SIP UPI Autopay cost more because of MDR?

No. UPI Autopay mandates, the mechanism most mutual fund SIPs use, are exempt from MDR entirely under the current framework, regardless of the SIP amount. Only one-time, manual UPI payments for investing fall under the 0.02% capital-markets rate.

How does UPI MDR affect Paytm’s stock?

Paytm (One97 Communications) shares rose as much as 7% to a 52-week high on the day NPCI’s MDR circular was confirmed, with some brokerages raising price targets on the view that MDR creates a new revenue opportunity from UPI merchant transactions that previously generated no fee income. This was a market reaction to a policy announcement, not a confirmed change in Paytm’s reported earnings, and is not a signal to buy or sell the stock.

What is the UPI MDR rate for mutual fund and stockbroking payments?

0.02%, capped at ₹300 per transaction, on capital-market UPI payments above ₹2,000, effective October 15, 2026. This applies to equity, debt, and mutual fund transactions and broker wallet top-ups, and is roughly a twentieth of the 0.4% standard merchant rate.

Should investors be worried about UPI MDR?

For the cost of investing itself, most analysts don’t see a meaningful impact: the capital-markets rate is low, SIP Autopay is exempt, and major brokers have said they’ll absorb the charge. The more open question, raised by Zerodha specifically, is whether the ₹300 per-transaction cap makes the framework expensive for brokers to sustain at scale, which could eventually influence broker pricing or push for regulatory changes rather than an immediate cost to you today. This is general information, not investment advice, and shouldn’t be the basis for a trading decision.

References

• Angel One – UPI Payments for Mutual Funds, Stocks to Attract 0.02% MDR From October 15, 2026
• Inc42 – Zerodha, INDmoney Flag UPI MDR Impact On Brokers, Nithin Kamath Seeks ₹5-10 Cap
• The Tribune – Proposed UPI MDR structure doesn’t make sense for broking, could raise costs: Nithin Kamath
• Business Today – UPI MDR: Will mutual fund SIPs, stocks get costlier? Brokerages, experts explain impact on investors
• Business Today – Paytm shares surge 7%, Pine Labs falls 8% on MDR impact
• The CSR Journal – Shares of Paytm, MobiKwik and Pine Labs Surge Following UPI MDR Announcement
• Business Today – PB Fintech shares crash: why Policybazaar parent fell (IRDAI commission proposal, unrelated to MDR)