The proposed Rs 300 cap on UPI merchant discount rate (MDR) for capital market transactions “is not affordable” for stockbrokers, said Groww co-founder and CFO Ishan Bansal, arguing that customers frequently add money to broker-wallets without actually transacting.
“Rs 300 is not affordable either for us or for the customer because a lot of time customer doesn’t actually transact. They add money and then they don’t transact. Still, if you end up paying that cost, it doesn’t make sense,” Bansal said on Q2 FY27 analysts’ call.
Will Groww increase its brokerage fee? When asked whether Groww would re-evaluate its Rs 20-per-order brokerage fee to offset any higher UPI cost, Bansal said, “Not necessarily. I think we need to first… make our case to make sure that it doesn’t go that high.”
“We are not expecting a material change to our cost in any case, but obviously it will depend on how much that actual number comes out to be, because if the number is 0.4%, which they are charging for others, or 0.02%, the difference is huge.”
Groww confirmed that it has written to the Securities and Exchange Board of India (SEBI), recommending different MDR pricing for capital market use cases, without sharing any details. The company is waiting for the final outcome.
The Economic Times previously reported that Groww, Angel One, Zerodha and Angel One were planning to propose capping the charge at Rs 5 instead of Rs 300 and increasing the zero-MDR threshold to Rs 20,000 from Rs 2,000.
The MDR framework was notified by the NPCI on September 15, with a 0.4% charge on eligible person-to-merchant (P2M) UPI transactions above Rs 2,000. For transactions of Rs 75,000 and above, the charge is capped at Rs 300.
For capital market transactions, including payments towards mutual funds, securities, stockbrokers and dealers, MDR is set at 0.02% of the transaction value, capped at Rs 300.
To be sure, all person-to-person (P2P) UPI transactions will remain exempt from MDR.
Why investment firms are opposing MDR on UPI: Groww is not the first broking firm to raise concerns about the MDR framework. Last month, CapitalMind founder and CEO Deepak Shenoy said the mutual fund industry currently pays a flat fee of Rs 2–3 per transaction, regardless of the amount invested.
If the charge increases to 0.02%, UPI charges could exceed the earnings of low-cost funds such as liquid funds, he argued.
The higher amount transactors are charged even lesser. And this cost is borne by the AMC so that it doesn’t hit fund investors in their expense ratios. If this increases to 0.02% – which would translate to Rs. 10 for an investment of Rs. 50,000, this would definitely have to be borne by the fund.
Take an example of a low cost fund like a liquid fund. It might charge you just 0.15% per year – or 15 bps. If you put Rs. 50,000 in the beginning of a month and take it out at the end of the month (to pay bills), and fund it using UPI, the fund will have to pay 0.02% each time for 12 months – 0.24% plus GST – making it nearly 0.29%.
How can a fund pay 0.29% as UPI fees when it charges only 0.15% as fees? It makes no sense and for such low fee, high transaction products wise, UPI won’t be fun. Sure, liquid funds usually get money from other places like netbanking and NEFT/RTGS, so for many of them it won’t matter. But the problem still remains for low cost index funds. — Shenoy
Nithin Kamath, co-founder of Zerodha, said:
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.
Just as an example, 10,000 customers could each make 50 UPI transfers of Rs 2 lakh in a month without executing a single trade. At the proposed MDR, this could potentially cost the broker around Rs 2 crore, without generating any business.
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.
MDR roll out delayed: While the MDR framework was scheduled to take effect on October 15, NPCI’s UPI and Services Steering Committee has deferred its implementation until after Diwali, citing the festive season. The implementation date will be notified separately.
Last week, merchant bodies, fintechs and payments companies asked NPCI to delay the implementation of UPI MDR until January 2027, arguing that the industry needed more time to resolve confusion over varying MDR rates, policies and their applicability.
Pushing back against the MDR framework, the Retailers Association of India previously said that merchants should not have to bear the cost of maintaining the UPI infrastructure. Meanwhile, fintech companies such as Paytm and MobiKwik have backed MDR on UPI, as it would generate additional revenue from their merchant businesses for many of payment transactions that were free earlier.
Also read:
- ‘Is it tax or a fee?’ SC asks Centre to explain UPI MDR, seeks RBI, NPCI responses
- How the govt’s role in pricing UPI is making MDR look like GST
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