Mumbai, Sep 17: The Securities and Exchange Board of India (SEBI) is looking into operational concerns raised by stockbrokers and asset management companies over the new Merchant Discount Rate (MDR) framework for UPI transactions, SEBI Chairman Tuhin Kanta Pandey said on Thursday.
The issue has gained attention among market intermediaries as the new framework is scheduled to take effect from October 15. Pandey said SEBI would examine the concerns and explore whether the implementation-related difficulties could be eased.
Under the new framework, capital-market transactions involving payments to mutual funds, stockbrokers, dealers and investment advisers will attract an MDR of 0.02 per cent of the transaction value, with the charge capped at Rs 300 per transaction.
The concern among brokers is mainly linked to the movement of client funds. Customers may transfer money to their trading accounts through UPI but may not immediately place a trade. Brokers could therefore incur the payment-related charge even when the transferred funds do not result in a corresponding brokerage transaction.
The issue becomes more relevant because SEBI rules require brokers to periodically return unused client funds. While the requirement is aimed at protecting client money and preventing misuse of funds, brokers have raised concerns about the additional cost and operational burden that frequent fund transfers could create.
At the same time, recurring UPI mandates and standing instructions, including those used for mutual fund systematic investment plans, will remain outside the MDR framework.
The proposed changes come as UPI becomes increasingly integrated with India's financial markets. For brokers, mutual fund platforms and other investment intermediaries, the way these charges are implemented could influence payment costs and the management of client funds.
SEBI's review is expected to provide greater clarity to market participants ahead of the October 15 rollout. For the broader financial sector, the discussion highlights the need to balance the growing use of digital payments with the operational realities of investment and capital-market transactions.
