UPI fee on share market payments raises confusion over who bears the cost

The imposition of a Merchant Discount Rate (MDR) on UPI transactions has caused confusion across the country. MDR is the fee charged to the party accepting a payment. Traders are already unhappy about this additional burden since they will have to bear the cost. Now the fee will not be limited to traders alone but will also affect the stock market. There were reports of discussions between the National Stock Exchange (NSE) and the government on this issue, on which NSE Managing Director and CEO Ashish Kumar Chauhan recently commented.

Speaking to the Economic Times, Chauhan clarified that NSE has held no discussions with the government regarding the new MDR for UPI. He said the matter is entirely between stockbrokers and their clients. How the burden of this new fee is to be handled, that is, who bears it and how it is divided, will have to be worked out by brokers and clients themselves. His remarks made clear that neither the government nor NSE will intervene in this decision.

From October 15, 2026, a 0.02 percent MDR will apply to UPI payments related to the stock market and other capital markets. This includes payments related to shares, securities, mutual funds and stockbrokers. However, a cap of Rs 300 per transaction has been placed on this fee, meaning that no matter how large the payment, the MDR will not exceed Rs 300 per transaction. This cap will apply to both small and large transactions.

It should be clearly noted that the MDR fee is not collected directly from customers. This cost has to be borne by the trader, that is, the party accepting the payment. The real question now is whether brokers or the companies concerned will absorb this additional cost themselves, or whether it will eventually be passed on indirectly to customers, and the answer to this is not yet clear.

For example, if a customer deposits money into their broker's account via UPI but does not actually purchase any shares afterward, the broker may still have to pay the MDR. This raises the question of exactly who should bear this additional cost in such cases. According to NSE CEO Ashish Chauhan, a solution to this will have to be worked out jointly by brokers and clients. He also noted that how brokers and clients respond to this new fee remains to be seen.