16 September,2026 03:34 PM IST | Mumbai | mid-day online correspondent
Representational Image. File pic.
With the government levying a fee on transfers worth more than Rs 2,000 made to merchants through the UPI platform, Zerodha founder Nithin Kamath on Wednesday said that the online brokerage firm could start charging a fee on equity delivery trades that are currently free to customers.
"By the way, we currently don't charge brokerage on equity delivery trades because the economics allow us to offer them for free. But if every UPI transfer starts carrying an additional cost, irrespective of whether the customer actually trades, I don't see how we can absorb this indefinitely," he said in a post on social media platform X.
The government on Tuesday had introduced 0.4 per cent charge on Unified Payments Interface (UPI) payments above Rs 2,000 to merchants and capped the fee at Rs 300 for payments of Rs 75,000 and above, from October 15, ending nearly six years of fully free UPI payments.
Kamath pointed out that the proposed MDR structure "doesn't really make sense" in cases such as investing and broking, as a broker cannot guarantee that money sent to trading account will actually result in a trade.
"The problem with broking is that there is no guarantee that money transferred to a broker will actually result in a transaction. As brokers, we can't force a customer to trade after transferring money. And if we can't pass the UPI charge on to the customer, there is essentially no limit to the cost a customer can impose on a broker without generating any revenue," he said.
To drive his point, he gave an example where 10,000 customers could each make 50 UPI transfers of Rs 2 lakh in a month without executing a single trade. In this scenario, at the proposed MDR, it could potentially cost the broker around Rs 2 crore, without generating any business.
He also flagged the impact of quarterly settlement requirements under which brokers are required to return unused client funds.
"What makes this even more challenging is quarterly settlement (QS). This is a SEBI regulation that requires brokers to send unused funds back to clients every month or quarter. Most customers then transfer these funds back to their broking accounts, with more than half of these transfers happening through UPI," he said
So regulation essentially forces this movement of money every month or quarter, and the broker could end up bearing the cost when the money comes back, without any incremental benefit or revenue," he added.
Kamath said the MDR rate that is capped at Rs 300 for broking is quite steep, especially when the transactions may not generate business.
"I think having an MDR is okay. It still doesn't solve the problem of customers transferring money without transacting, but something like 0.02 per cent with a cap of Rs 5 or Rs 10 per transaction seems much more reasonable for broking, instead of a cap as high as Rs 300," he said.
Given the widespread adoption of digital payments, he noted that the charge on UPI was inevitable and could lead to competition in the UPI ecosystem where it is largely dominated by three players.
"I think MDR on UPI was probably inevitable at some point, especially given how widespread UPI adoption has become. It could also lead to more competition, instead of just three apps accounting for more than 95 per cent of the market," he said.
On Tuesday, the National Payments Corporation of India (NPCI) that operates UPI, said an MDR of 0.4 per cent will be levied on Person to Merchant transactions above Rs 2,000, while MDR will be capped at Rs 300 per transaction on high-value payments of Rs 75,000 and above.
Essential sectors like telecom, insurance, fuel sectors will pay a flat MDR of Rs 5 per transaction, while payments towards mutual funds, and stock brokers will attract an MDR of 0.02 per cent, capped at Rs 300.
However, small merchants receiving up to Rs 1 lakh per month will have mandatory zero MDR for all transactions.
