2 hrs ago
Discount brokers challenge UPI fees over thin margins and costs
A new charge is being added to some UPI payments made to stockbrokers.
The charge is 0.02% when the payment is more than ₹2,000.
Brokers say this could cost them much more than they earn from many trades.
They explain that money sent by clients is usually passed on to clearing corporations.
Brokers cannot use that money as their own.
Unused money must also be sent back to clients every month or quarter.
If the client sends the same money again, the charge could apply again.
The brokers want the regulator to consider the effect on their businesses.
A 0.02% fee on stock-market UPI transactions above ₹2,000 begins on 15 October.
The BSE Brokers' Forum told Sebi the fee could exceed brokers' earnings.
Brokers say client funds are pass-through money sent to clearing corporations for settlement.
Unused client funds must be returned periodically, potentially triggering the fee again.
Sebi requires registered brokers to use valid UPI handles and display them online.
- Who
- Discount brokers, the BSE Brokers' Forum, and the Securities and Exchange Board of India (Sebi).
- What
- Brokers are opposing a 0.02% UPI fee on stock-market transactions above ₹2,000.
- Where
- The fee concerns UPI payments made to brokers' designated client bank accounts for stock-market transactions.
- When
- The fee is scheduled to take effect on 15 October.
- Why
- Brokers say the fee could be several times their brokerage income because client funds are passed through to clearing corporations and unused funds must be returned.
Broker and industry concerns
Jurisdiction view
Whether the fee fits stockbroking
Broker and industry concerns
The BSE Brokers' Forum and brokers say treating brokers as merchants is misplaced because they mainly pass client funds to clearing corporations. They warn the levy could make some brokerage activities unviable.
Jurisdiction view
A person familiar with the issue said the matter was not within Sebi's domain.
Impact on broker economics
Broker and industry concerns
Brokers say the fee on the full amount deposited by a client can be much larger than the brokerage earned, especially when trades are free or charged at a flat ₹10–20 per order.
Jurisdiction view
The article does not report a detailed public justification for the fee or a specific response from Sebi.
Key facts
- Fee rate
- 0.02% on UPI transactions above ₹2,000
- Effective date
- 15 October
- Broker concern
- The merchant discount rate could exceed the brokerage earned on a transaction.
- Client-fund treatment
- Funds must be sent to clearing corporations by the end of the day and cannot be used by brokers.
- Unused funds
- Clients can require unused funds to be returned monthly or quarterly.
- Broker pricing example
- Some brokers charge nothing for delivery-based cash-market trades and ₹10–20 per order in futures, options, and other segments.
- UPI compliance
- Sebi has ordered registered brokers to use valid UPI handles and display them on their websites.
Quotes
Another broker
An unnamed broker commenting on the proposed UPI fee
“So, levying MDR on the entire fund flow, rather than the broker’s actual revenue which is brokerage, would make UPI prohibitively expensive and effectively a non-starter for the broking industry.”
livemint.com
“This is a pay-in (by a client) and not a purchase”
livemint.com
Sources
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