Industry Odisha Bureau, Oct 02: A 0.02% UPI MDR on capital-market payments starts on 15 October. Brokerages fear costs on transfers that never become trades. Mandates and new charges are being weighed, testing free services.
An investor can move money into a trading account and never trade. From 15 October, that transfer may still cost the brokerage. A new UPI merchant discount rate (MDR) applies to capital-market payments. Brokers are weighing mandates, new charges and leaner free offerings. People familiar with the matter described the options.
A Small Charge, Repeated
The MDR is a fee on the merchant receiving a payment. The rate is 0.02% per transaction, capped at ₹300. The National Payments Corporation of India (NPCI) says charges should not reach consumers. That leaves brokers seeking other ways to protect margins. Each charge is small, but transfers repeat.
Transfers Without Trades
The core problem is a mismatch. Funding an account does not always lead to a trade. The broker can bear payment costs without earning brokerage.
Sebi rules add more movement. Brokers must return unused client funds every month or quarter. Those refunds create more transactions and more cost, with no matching revenue.
India Cements Capital’s K Suresh noted that brokers receive margin funds very often. Not every transfer, he said, generates income. One official at a top brokerage expects a monthly revenue hit of ₹5-6 crore. That is one firm’s estimate, not an industry figure.
Mandates Offer Another Route
Mandates are one alternative under consideration. A mandate costs around ₹3.25 a quarter to maintain, a brokerage official said. Compare four ₹5,000 UPI transfers in a quarter. At 0.02%, each costs ₹1 in MDR, or ₹4 in total. For frequent small transfers, a mandate could work out cheaper. Larger sums raise the stakes: a ₹5 lakh transfer attracts ₹100. Whether brokers widely adopt mandates remains unclear.
Free Brokerage Meets Payment Costs
The pressure is sharpest for free services. Zerodha charges no brokerage on equity delivery trades. It charges 0.03% or ₹20, whichever is lower, on intraday and futures orders. Stock options carry a flat ₹20 per executed order.
Chief executive Nithin Kamath said on X he doubted Zerodha could absorb the cost indefinitely. A charge on cash-market transactions is being discussed internally, an official said. Free delivery remains in place for now.
Different Brokers, Different Maths
Angel One, India’s second-largest broker by active clients, has 3.97 crore, per NSE data. It offers zero brokerage up to ₹500 for a client’s first 30 days. Afterwards, intraday trades cost ₹20 or 0.1%, whichever is lower, with a ₹5 minimum.
The Limits Behind the Cap
The ₹300 cap matters little in practice here. NPCI caps single capital-market UPI payments at ₹5 lakh. The 24-hour cumulative limit is ₹10 lakh. At 0.02%, even ₹5 lakh produces just ₹100 in MDR.
Investors May Feel It Indirectly
Investors may still feel indirect effects. Brokers could trim free services, raise minimum transfers or nudge clients towards NEFT. Higher brokerage or new charges are also possible. These sit atop existing costs like securities transaction tax, stamp duty and GST.
Suresh wants a simple ₹5 charge, like insurance payments. Without relief, he warned, some zero-brokerage firms may switch off UPI.
Free Trading Faces a Cost Test
The UPI MDR looks small on any single transfer. Its weight comes from transfers that never become trades. That could push brokerage pricing in new directions. Which firms change charges, and how, remains to be seen.
