Experts suggest that the upcoming merchant discount rate fee on UPI transactions for mutual funds and share trades will primarily burden service providers, not individual investors, despite concerns over increased costs.
Investors using UPI for mutual fund purchases and share-related payments are unlikely to face a direct extra charge, even as India’s payments system prepares for a new merchant discount rate framework, according to experts cited by Zee Business. The debate has centred on whether everyday investors will be asked to pay more when they route money through UPI for lump-sum investments, brokerage transfers or systematic investment plans, but the current view is that the cost will fall on fund houses, platforms or other service providers rather than on customers.
Under the new structure, a 0.02% charge applies to certain UPI transactions linked to mutual funds and the securities market. Kshitij Mahajan, chief executive of Complete Circle Wealth, told Zee Business that a Rs 1 lakh transaction would generate a fee of Rs 20, but said the investor would not be billed directly. Other reports, including those from Livemint and Cafe Mutual, say the levy is expected to be folded into the merchant side of the transaction and, in the case of mutual funds, absorbed within the broader cost structure.
For systematic investment plans, the impact appears even more limited. Livemint reported that recurring SIP payments made through UPI AutoPay are exempt from the charge, while one-time capital-market payments such as lump-sum mutual fund investments may attract the 0.02% rate. That still leaves the direct consumer cost at zero, with the fee payable by the merchant rather than the investor. Mutual fund companies already shoulder other payment-related expenses, including costs tied to debit cards and registration services, according to the Zee Business discussion.
The picture is similar for share purchases and broker transfers, where the practical effect is likely to be modest. Harsh Longa, founder of Fee Only Investment Advisors, said on Zee Business that the hit to brokers should be limited because UPI is not the main channel for large securities transfers. Investors typically rely on net banking, NEFT, IMPS or RTGS for bigger payments, partly because UPI has a daily limit of Rs 1 lakh for the type of transaction being discussed. That cap also makes UPI less suitable for larger trades, even if it remains useful for smaller and faster payments. Some industry reports suggest the fee could matter more for larger one-off investments and new fund offer subscriptions, but the broad consensus remains that retail investors are unlikely to see a direct charge on their statements.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
