Zerodha’s Kamath backs UPI MDR but seeks lower, capped fees for brokers

Nithin Kamath says UPI merchant discount rates are inevitable but warns the proposed 0.4% levy, capped at ₹300 per transaction, could create significant funding-transfer costs for brokers. He has proposed a 0.02% rate with a ₹5–₹10 cap for broking transactions.

— Source publishedWed, 16 Sept, 2026, 11:48 IST·First seen Wed, 16 Sept, 2026, 11:50 IST·Source Mint · Money

What happened

Zerodha co-founder Nithin Kamath supported UPI MDR as inevitable but warned the proposed 0.4% fee, capped at ₹300, could impose uncapped costs on brokers when

Key facts

  • 0.4% MDR on UPI merchant transactions above ₹2,000
  • ₹300 maximum MDR cap per transaction
  • Kamath proposed 0.02% MDR capped at ₹5-₹10
  • Three UPI apps account for more than 95% of the market
  • Example: 10,000 customers making 50 transfers of ₹2 lakh could cost a broker about ₹2 crore

Why this matters

Sector-specific MDR caps could reshape payments economics for brokerages, creating partnership and pricing opportunities for low-cost account-funding alternatives.

What to watch

  • RBI, NPCI or finance ministry consultation language on merchant categories, transaction-value thresholds and MDR caps.
  • Whether securities broking, mutual-fund investing and wallet loading are explicitly classified separately from retail merchant payments.
  • Any proposed MDR rate near 0.4% versus a low-basis-point model, and whether caps apply per transfer, per day or per customer.
  • Broker announcements of UPI funding fees, changes to free withdrawals, or incentives for bank-transfer funding.
  • Government budget allocations or payment-industry subsidy mechanisms supporting UPI operating costs.
  • Broking platforms lobby NPCI, RBI and finance ministry for a distinct merchant category for securities-account funding and proof that these transfers are not conventional retail purchases.
  • Large brokers evaluate passing MDR through as a visible account-funding fee, embedding it in platform charges, or steering customers to net banking and direct bank-transfer rails.
  • Payment aggregators and banks push for a higher MDR or interchange pool, arguing that sustained zero-fee UPI constrains infrastructure investment and fraud controls.
  • Discount brokers intensify efforts to reduce repeated intra-day fund transfers through balance-ledger design, instant payout controls and pre-funded trading workflows.

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