New MDR norms put netbanking back in play for Indian stockbrokers

UPI carries 0.02% MDR, capped at ₹300, while netbanking costs ₹8-12, negotiated between banks and payment service providers

Stock brokers could prefer netbanking over Unified Payments Interface (UPI) for large fund transfers once a new merchant discount rate (MDR) of 0.02 per cent on capital market transactions takes effect on October 15, payment processing partners of such brokers said.

Companies are likely to weigh the unit economics of processing netbanking transactions and UPI. However, the choice of payment mode is subject to customer preference at a time when UPI has become the dominant rail for digital payments.

While an MDR on UPI comes with a nominal 0.02 per cent fee, with a maximum cap of ₹300, netbanking transactions have a flat fee of ₹8 to ₹12, negotiated between banks and payment processing partners.

“From the perspective of capital markets, since they cannot pass on costs to customers, they might be inclined to accept payments using netbanking at a negotiated, flat rate. We might see some volume shift from UPI to netbanking after October 15,” a senior leader at a payment aggregator firm said.

To put things in perspective, a 2 basis points (bps) or 0.02 per cent MDR on UPI for a ₹1 lakh transaction will incur a fee of ₹20 for a broker. This is more expensive than accepting a payment through netbanking, which costs ₹8 to ₹12 on average for the same transaction.