New Delhi, September 16, 2026 (Yes Punjab News)
Zerodha co-founder and CEO Nithin Kamath has backed the introduction of Merchant Discount Rate (MDR) on select UPI transactions, describing the move as “probably inevitable” as digital payments have become deeply integrated into everyday transactions.
In a post on X, Kamath said the new MDR framework could also encourage greater competition in the UPI ecosystem, where a small number of apps account for the overwhelming majority of transactions.
However, he raised concerns about applying the new pricing structure to investment and broking transactions, arguing that brokers could incur payment costs even when a customer transfer does not ultimately result in a trade.
Kamath gave an example of 10,000 customers making 50 UPI transfers of Rs 2 lakh each in a month without executing trades. Under the broader MDR structure, he said, this could potentially result in a cost of around Rs 2 crore for a broker.
The concern is particularly relevant because the government’s new framework provides for a 0.02 per cent MDR on payments relating to mutual funds, securities, stockbrokers and dealers, capped at Rs 300 per transaction. The framework takes effect from October 15, while person-to-person UPI transactions remain free.
Kamath also highlighted the impact of the regulatory requirement for brokers to periodically return unused client funds to their bank accounts. Under SEBI’s settlement framework, unused funds are transferred back to clients on a quarterly basis, while monthly settlement can apply in certain circumstances, including prolonged inactivity.
He said customers frequently transfer funds back into their broking accounts after such settlements, with a significant share of these transactions taking place through UPI. As a result, brokers could potentially bear MDR costs repeatedly without generating additional revenue from corresponding trades.
The broader UPI framework provides for a 0.4 per cent MDR on specified person-to-merchant transactions above Rs 2,000, capped at Rs 300 for transactions of Rs 75,000 or more. The government has said approximately 96 per cent of P2M transactions will remain unaffected, while customers will not be charged MDR.
Kamath’s comments therefore support the broader move towards a more sustainable UPI payment ecosystem while seeking a different treatment for high-frequency fund transfers associated with investment and broking activities.
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