New Delhi, Sept. 17 -- You will start to see merchants paying a fee (merchant discount rate, MDR) to receive money in transactions above Rs.2,000 from 15 October.

Merchants will pay 0.40% of a transaction. But certain merchants will pay less. Insurance, for example, pays a flat Rs.5 per transaction. Lumpsum investments into mutual funds made through UPI will be charged 0.02% (2 basis points, bps), which the fund house might need to bear. Brokers too will pay a similar 0.02% on inflows that use UPI.

Fair disclosure: we run a mutual fund, so assume bias. The problem isn't that asset management companies must bear this cost-it's that the cost of incremental investment in a fund is very high for a low-cost fund. Many low-cost index funds ch...