Investors using UPI to make payments for mutual funds and equity investments are unlikely to face a direct additional burden under the new UPI merchant discount rate (MDR) framework, according to experts.
The issue has raised questions among investors about whether they will have to pay extra when making mutual fund investments, buying shares or transferring money to their brokerage accounts through UPI.
The new framework provides for a 0.02 per cent charge on certain UPI transactions related to mutual funds and the securities market. However, according to the experts in Zee Business, the charge will be borne by mutual fund companies or service providers rather than individual investors.
Will mutual fund investors pay UPI charges?
Experts said mutual fund investors should not be directly affected by the new charge.
Kshitij Mahajan, CEO of Complete Circle Wealth, explained that UPI transactions for mutual fund investments can attract a 0.02 per cent charge, but the cost is expected to be paid by the mutual fund company or service provider.
For example, a 0.02 per cent charge on a Rs 1 lakh transaction would amount to Rs 20. However, this amount would not be directly charged to the investor under the arrangement discussed by the experts.
What about SIP payments?
The discussion also addressed whether investors making regular SIP payments through UPI would face an additional charge.
According to experts in Zee Business show, the new charge discussed applies to lump-sum investments rather than the SIP facility. Mutual fund companies are also expected to absorb the applicable payment-related cost.
Experts said mutual fund houses already bear various transaction-related costs for payment facilities. These include costs associated with certain debit card and registration services.
What happens when buying shares?
Investors transferring money for stock market investments through UPI could also come under the new framework.
However, experts said the impact on investors is expected to remain limited. There is a daily UPI transaction limit of Rs 1 lakh for the type of investment transaction discussed.
At the maximum Rs 1 lakh transaction value, a 0.02 per cent charge would work out to Rs 20. The experts said clarity was still awaited on whether a demat account provider or other service provider would absorb this cost in every case.
Limited impact on brokers
Fee Only Investment Advisors founder Harsh Longa said the impact on brokers could be limited because UPI is not the most commonly used payment method for securities transactions.
Investors generally use banking channels such as net banking, NEFT, IMPS and RTGS for larger transfers to brokers, according to the discussion.
The UPI limit also makes it less suitable for large trading and investment transactions. Large-value transactions are generally handled through other banking channels.
Other payment options remain available
Experts said investors have several alternatives, including net banking, NEFT, RTGS and other banking channels.
They also noted that UPI continues to offer convenience for smaller and immediate investment transactions. As a result, mutual fund companies may continue offering UPI as a payment option while absorbing the relatively small transaction cost.
Overall, the experts said the impact of the new framework on mutual fund and equity investors is expected to be limited, particularly because the payment cost is not expected to be directly passed on to investors in the cases discussed.