Zerodha flags UPI MDR costs for brokers, seeks lower cap on fund transfers
Zerodha founder Nithin Kamath said NPCI’s proposed 0.02% UPI MDR for capital-market payments could create sizeable broker costs even when customers do not trade. He argued that the Rs 300 transaction cap is unsuitable for broking and suggested a Rs 5-10 cap.
What happened
Zerodha founder Nithin Kamath warned NPCI’s UPI MDR for capital-market payments could impose major costs on brokers even when client fund transfers do not
Key facts
- UPI MDR: 0.02%
- MDR cap: Rs 300 per transaction
- Effective date: October 15, 2026
- Three apps account for over 95% of UPI transactions
- Hypothetical: 10,000 customers making 50 transfers of Rs 2 lakh each
- Potential monthly broker cost: about Rs 2 crore
- Suggested cap for broking payments: Rs 5-10
Why this matters
Brokerages have an incentive to coordinate with NPCI, banks and payment partners on a lower capital-markets cap while expanding alternatives for funding accounts.
What to watch
- NPCI circular specifying whether the 0.02% MDR applies to all capital-market UPI transfers, only merchant flows, or only trade-linked payments.
- Final confirmation of the October 15, 2026 effective date and any exemption, transition, or per-transaction cap revisions.
- SEBI, stock-exchange, broker-association, or AMFI responses distinguishing broker funding from investment execution.
- Announcements by Zerodha, Groww, Angel One, Upstox, ICICI Direct, and bank-backed brokers on UPI deposit charges or alternative funding incentives.
- Changes in UPI funding mix, average deposit size, deposit frequency, and dormant-account activity after policy clarification.
- Any consumer-protection scrutiny if brokers begin charging customers for deposits or make withdrawals and re-funding more costly.
- Zerodha and peer brokers form an industry representation seeking a Rs 5-10 cap or an exemption for non-trade-linked account funding.
- Brokerages model customer-level transfer costs and introduce nudges toward direct bank transfer, net banking, recurring mandates, or consolidated funding flows.
- Large brokers seek commercial arrangements with banks, payment service providers, and UPI partners to reduce effective MDR exposure.
- Discount brokers reassess zero-fee positioning as payments costs add pressure to already thin per-client monetization.
- Platforms may impose deposit frequency limits, cooling periods, or explicit charges for repeated UPI fund additions and withdrawals.