With reference to the new UPI Merchant Discount Rate (MDR) for capital market transactions, consider the following statements: 1. The MDR is capped at ₹500 per transaction. 2. The new MDR is scheduled to be implemented from 15 October. 3. The new UPI MDR is set at 0.02% for capital market transactions. Which of the statements given above is/are correct?

Sebi to examine discount brokers’ concerns over new UPI MDR

GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims + Mains· 18 September 2026

Impact of transaction costs on retail participation in capital markets: a GS3 and Economy case study.

Why in news

SEBI is set to examine concerns from discount brokers regarding a new UPI Merchant Discount Rate (MDR) of 0.02% on capital market transactions starting October 15.

Background

The new UPI MDR for capital market transactions is set at 0.02% with a cap of ₹300 per transaction. Discount brokers, such as Zerodha, argue that frequent fund movements required by quarterly settlement regulations may incur costs without generating corresponding revenue.

Facts for Prelims

FactUPI MDR for capital market transactions: 0.02% capped at ₹300 per transaction
FactImplementation date for new MDR: October 15

Prelims practice question

With reference to the new UPI Merchant Discount Rate (MDR) for capital market transactions, consider the following statements:

The MDR is capped at ₹500 per transaction.
The new MDR is scheduled to be implemented from 15 October.
The new UPI MDR is set at 0.02% for capital market transactions.

Which of the statements given above is/are correct?

(a)2 only
(b)1 and 3 only
(c)2 and 3 only
(d)1, 2 and 3

Show answer

Answer: (c) 2 and 3 only — Statements 2 and 3 are correct. Statement 1 is incorrect: The note states the cap is ₹300 per transaction.

For Mains

Q. Discuss the implications of transaction costs on the growth of retail participation in capital markets and the role of regulatory bodies in balancing infrastructure costs with investor accessibility.

Dimensions to cover in your answer

Cost-push inflation: Impact of MDR on high-frequency, low-value retail transactions
Regulatory friction: Balancing UPI infrastructure sustainability with the operational viability of discount brokerage models
Settlement dynamics: Conflict between mandatory quarterly fund movements and non-revenue generating transfers

Keywords: Merchant Discount Rate · Capital Market · Retail Participation · Regulatory Oversight · Financial Infrastructure

Read the full news →Source: Economic Times ↗Also: GS2 · e-Governance & citizen services

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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.