Market regulator discusses UPI payment charges with NPCI following broker concerns

India's markets regulator is in talks with the National Payments Corporation of India over a newly introduced merchant discount rate on certain UPI transactions. Securities and Exchange Board of India chairman Tuhin Kanta Pandey confirmed the discussions at an event on Thursday as stockbrokers warned the fees could raise their operating costs.

Fee Details

Merchant discount rate is a fee charged to merchants on digital payments, with the money shared among banks and payment service providers. The new framework sets a rate of 0.4% on person-to-merchant UPI payments above 2,000 rupees. For payments of 75,000 rupees and above, the fee has a limit of 300 rupees per transaction. Capital-market transactions involving mutual funds, securities, and brokers carry a lower rate of 0.02%, also capped at 300 rupees. These charges were originally meant to start on October 15 but have now been delayed until after Diwali.

Broker Concerns

Stockbrokers have asked the regulator and the central government to reconsider the charges. They worry because money sent into a trading account does not always lead to a trade. Investors often transfer funds and leave them sitting idle, while brokers still pay transaction costs without earning any brokerage income. Rules require registered brokers to display verified UPI handles on their websites so investors send money safely. Brokers fear these fees could easily cross the actual brokerage earnings they make on trades.

Context

Payment fees on digital transactions are common in the financial industry to support the infrastructure used by banks and apps. When payment rules change, intermediary businesses often face new cost pressures that can lead to discussions between regulators and industry groups. Market participants frequently review such policies to balance the cost of digital payments with the needs of everyday investors and financial firms.