Zerodha CEO Nithin Kamath on UPI MDR: 0.02% Fee, But Cap It at Rs 5-Rs 10

Zerodha CEO Nithin Kamath says UPI MDR is "probably inevitable" but warns broking costs will spike when money moves without trades. He wants the 0.02% broking MDR capped at Rs 5Rs 10, not Rs 300. NPCIs new rules start October 15, 2026; govt says 96% of P2M stays unaffected.

Zerodha co-founder and CEO Nithin Kamath has waded into the debate over Merchant Discount Rate (MDR) on UPI, arguing that the current design for capital-market flows could saddle brokers with costs even when clients do not place a trade. Posting on September 16, 2026, he said MDR is "probably inevitable" but warned that broking is a special case.

Under the National Payments Corporation of Indias updated framework effective October 15, 2026, select person-to-merchant UPI payments above Rs 2,000 will attract an MDR of 0.4 per cent, capped at Rs 300. The charge sits within the merchant ecosystem and is not levied directly on consumers; person-to-person transfers remain free.

For capital-market payments involving mutual funds, securities, stockbrokers and dealers, the MDR is set at 0.02 per cent with a Rs 300 cap  a structure Kamath questioned.

## Why brokers say MDR hurts when no trade happens

Kamath noted that moving money into a broking account does not necessarily lead to an order being executed. "The problem with broking is that there is no guarantee that money transferred to a broker will actually result in a transaction," he said.

Why brokers say MDR hurts when no trade happens

SEBIs quarterly settlement rules further complicate flows, since brokers must return idle funds and many customers then move money back, often via UPI. Kamath said more than half of such re-transfers happen on UPI, implying brokers could pay repeatedly without generating brokerage revenue.

He illustrated this with a hypothetical: if 10,000 customers each made 50 UPI transfers of Rs 2 lakh in a month without a single trade, MDR could cost a broker about Rs 2 crore.

"We currently dont charge brokerage on equity delivery trades because the economics allow us to offer them for free," he said, cautioning that recurring UPI costs on fund inflows could strain that model over time.

## Kamaths proposed cap and the governments stance

Kamath also argued MDR could spur competition in a market where three apps account for more than 95 per cent of UPI transactions. "I think having an MDR is okay," he said, proposing the 0.02 per cent broking MDR be capped at Rs 5 or Rs 10 per transaction, not Rs 300.

Kamaths proposed cap and the governments stance

The Finance Ministry has clarified that P2P remains free, payments to merchants up to Rs 2,000 stay free, and small merchants under the zero-MDR framework are protected, estimating about 96 per cent of P2M transactions will be unaffected.

Earlier, BharatPe co-founder Ashneer Grover criticised the prospect of MDR on higher-value UPI, questioning charges above Rs 2,000 and urging India to reduce reliance on cash infrastructure and ATMs.

UPI processed about 2,451 crore transactions worth Rs 29.9 lakh crore in August 2026. As the new regime begins on October 15, the question for investors and brokers is who ultimately bears repeated costs when money moves in and out of investment accounts.