Archive · 16 Sep 2026
Nithin Kamath Backs UPI MDR, Seeks Lower Broking Cap
India is changing how some larger UPI payments are funded.
Certain payments to businesses above Rs 2,000 will have a small fee inside the payments system.
People are not expected to pay this fee directly.
Stockbrokers will have a lower rate, but the maximum fee could still be Rs 300.
Nithin Kamath says this could hurt brokers when customers add money but do not buy or sell anything.
Customers may also move money back and forth because of settlement rules.
Kamath wants the broking fee capped at only Rs 5 or Rs 10.
The National Payments Corporation of India and payments experts say the change can help pay for safer and more reliable UPI services.
The government says most ordinary UPI payments will remain unaffected.
The National Payments Corporation of India will introduce a revised UPI MDR framework from October 15, 2026.
Specified person-to-merchant payments above Rs 2,000 will carry a 0.4% MDR, capped at Rs 300.
Capital-market payments will face a 0.02% MDR, also capped at Rs 300, while customers will not pay the charge directly.
Zerodha co-founder Nithin Kamath said brokers could incur large costs when customers transfer funds but do not trade.
Kamath proposed keeping MDR for broking but lowering the cap to Rs 5 or Rs 10 per transaction.
- Who
- The National Payments Corporation of India, Zerodha co-founder Nithin Kamath, brokers, payment providers and government officials are involved.
- What
- A revised UPI Merchant Discount Rate framework will introduce charges for selected transactions, including capital-market payments.
- When
- The framework is scheduled to begin on October 15, 2026.
- Where
- The change applies across India’s UPI and digital-payments ecosystem.
- Why
- The framework is intended to support the long-term sustainability of UPI, while Kamath wants to prevent excessive costs for brokers when transfers do not lead to trades.
Lower Broking Cap
Current Framework And Sustainability
Cost when no trade occurs
Lower Broking Cap
Nithin Kamath says a transfer into a brokerage account does not guarantee a trade, so brokers could repeatedly pay MDR without earning revenue.
Current Framework And Sustainability
The framework treats capital-market payments as a distinct category with a lower 0.02% rate, and its proponents say larger commercial payments should contribute to the payment system’s costs.
Effect of settlement rules
Lower Broking Cap
Kamath says quarterly settlement requirements can force funds to move out of and back into brokerage accounts, creating repeated UPI costs, especially for brokers offering free equity delivery trades.
Current Framework And Sustainability
Supporters of the broader framework emphasize funding infrastructure, cybersecurity, fraud prevention, reliability and customer support rather than addressing the specific economics of individual brokers.
Who should bear the cost
Lower Broking Cap
Kamath wants MDR retained but capped at Rs 5 or Rs 10 for broking; BharatPe co-founder Ashneer Grover separately criticized making higher-value UPI payments more expensive.
Current Framework And Sustainability
The government says person-to-person payments, merchant payments up to Rs 2,000 and specified small-merchant transactions remain free, while EY India’s Ranadurjay Talukdar said the framework can support a more sustainable digital-payments infrastructure.
- General P2M rate
- 0.4% for specified person-to-merchant transactions above Rs 2,000
- General transaction cap
- Rs 300 per transaction
- Capital-market rate
- 0.02% for specified mutual fund, securities, broker and dealer payments
- Proposed broking cap
- Nithin Kamath suggested Rs 5 or Rs 10 instead of Rs 300
- Customer impact
- The MDR is paid within the payments ecosystem rather than directly by customers
- Potential broker cost
- Kamath said 10,000 customers making 50 transfers of Rs 2 lakh each without trading could cost a broker around Rs 2 crore
- UPI August 2026 volume
- About 2,451 crore transactions worth Rs 29.9 lakh crore, according to the second article
