SEBI to review stockbrokers’ complaints about new UPI MDR for market-related payments

Mumbai: The Securities and Exchange Board of India (Sebi) will examine concerns raised by discount brokers over the new merchant discount rate for big fund transfers through UPI (unified payments interface), its chief Tuhin Kanta Pandey said Thursday. "I think there are some important issues there. We will certainly look into it and see how we can ease them," Pandey said on the sidelines of an event.Under the new framework, capital market transactions, including payments to stockbrokers, mutual funds, investment advisors and dealers, will attract an MDR of 0.02%, capped at ₹300 per transaction, from October 15.Read more: Retail investors pull Rs 5,674 crore from stocks, invest Rs 12,618 crore into IPOs in July-AugustStockbrokers operating on wafer-thin margins have approached Sebi raising concerns the charge could disproportionately increase their costs since money transferred by a client to a broking account does not necessarily 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," Nithin Kamath, founder of discount broking platform Zerodha, wrote in a post on his social media handle.Read more: Paytm karo, back in vogue again: Can the stock reclaim IPO price after 5 years and 480% rally?"What makes this even more challenging is quarterly settlement. 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. So, regulation essentially forces this movement of money every month or quarter, and the broker could end up bearing the cost when money comes back, without any incremental benefit or revenue," Kamath said.In a separate development, the Sebi chairman said the regulator has not received any proposal from the National Stock Exchange (NSE) seeking regulatory approval to trade on its own platform after getting listed. "No, there is no such letter and there is no such requirement," Pandey said.The NSE stock will be listed on its rival, the Bombay Stock Exchange. Unlike the Australian bourse which listed its stock on its own platform in 1998, India allows only cross-listing, and the BSE stock is listed on the NSE.

SEBI Chairman Tuhin Kanta Pandey on Thursday said the markets regulator would review concerns raised by stockbrokers regarding the newly introduced Merchant Discount Rate (MDR) structure for UPI transactions.Speaking at the NaBFID Infrastructure Conclave 2026, Pandey acknowledged the issues highlighted by brokers and said the regulator would examine them."Some important issues raised and we will look into concerns," Pandey said.The comments came after several brokerage firms raised concerns about the possible financial impact of MDR charges on stockbroking operations. Under the revised UPI framework, payments made to stockbrokers and dealers will attract an MDR of 0.02%, with a maximum cap of Rs 300 per transaction from October 15.UPI MDR Debate: Traders Divided Over 40 Basis Point Charge On Large Digital Payments, Warn Of Cash Shift And Tax Risks Brokers raise concerns over additional costsWhile the MDR applicable to capital-market transactions is significantly lower than the 0.4% charge proposed for eligible merchant payments above Rs 2,000, brokers have questioned the way the fee would apply.The main concern is that brokers may have to bear the cost whenever customers transfer funds into their trading accounts, even if those funds are not used for executing any transaction. Since the MDR is charged on the payment movement rather than the revenue earned from trades, repeated fund transfers could increase operational expenses for brokerage firms. Zerodha flags impact on broking industryZerodha co-founder Nithin Kamath has also highlighted the issue, stating that brokers could incur UPI-related costs when customers add money to their accounts but do not subsequently place trades.Kamath has suggested that the cap for broking-related UPI transactions should be reduced to limit the financial burden on brokers.The introduction of MDR on selected UPI transactions is aimed at creating a sustainable revenue framework for digital payments. However, the stockbroking industry has sought clarity on how the charges will apply and whether modifications are needed to prevent unnecessary costs arising from non-trading fund transfers.