Brokers may urge Sebi to cap UPI MDR at Rs 5 and raise the zero-fee threshold to Rs 20,000, sources say.
Groww, Zerodha, Upstox and Angel One are preparing to write to Sebi about merchant discount rate charges on UPI transfers into broking accounts, according to sources.
The brokers are expected to ask Sebi to cap the UPI merchant discount rate at Rs 5 instead of Rs 300, according to sources.
The same representation is likely to seek raising the zero-MDR threshold for UPI transactions to Rs 20,000 from Rs 2,000, according to sources.
The brokers are also expected to renew a long-standing request to revisit mandatory periodic settlement of unused client funds, according to sources.
Groww, Zerodha and other online brokerages are preparing to ask the country’s market regulator to cut UPI transaction charges for brokerage account transfers, according to sources.
New-age brokers Groww, Zerodha and others are set to write to Sebi over UPI MDR because the firms are raising concerns about merchant discount rate on UPI transfers to broking accounts, according to sources. The issue matters because it highlights how payment-system charges and regulation can affect retail brokerage platforms.
According to sources, the representation is expected to come from a group that includes Groww, Zerodha, Upstox and Angel One. Their core ask is straightforward: cap the merchant discount rate, or MDR, on UPI transfers to broking accounts at Rs 5 instead of Rs 300. The brokers also plan to seek an increase in the zero-MDR threshold to Rs 20,000 from Rs 2,000, according to sources.
That sounds technical, but the business point is simple. Retail brokerages depend on quick account funding to keep trading activity smooth, especially during market hours. Higher charges on deposits above a low threshold can add to costs for platforms serving retail investors.
India’s online brokerages have built around UPI, the country’s real-time payments network, as a common way for users to fund trading accounts. That has helped make transfers quick and simple, but it also means policy and pricing changes can directly affect brokers’ operating costs.
The brokers’ planned note to Sebi also goes beyond payment pricing. According to sources, they want the regulator to reconsider mandatory periodic settlement of unused client funds, a long-running issue for the industry. That requirement can force money to move back out of brokerage accounts even when users intend to redeploy it soon, adding more friction to those flows.
India’s consumer brokerage market has been reshaped by app-first firms that turned investing into something closer to mobile banking, with instant onboarding, low fees and UPI-led deposits. If the cost of moving cash in and out rises unpredictably, larger incumbents may absorb it more easily than newer, growth-oriented platforms. That can affect competition without directly changing headline user fees.
The zero-MDR threshold request is also significant. The group plans to propose lifting that threshold to Rs 20,000 from Rs 2,000, according to sources. In practice, that would better align with larger brokerage account funding transfers.
India has already seen public debate over whether UPI should remain effectively free at the point of use, and whether the system’s economics can hold up as volumes rise. This latest brokerage push fits into that broader argument. In India, UPI is at the center of the issue.
Another reason this matters is that brokerage apps are not just payment recipients. They are part of a wider consumer finance stack where the speed of cash movement affects product design. Fast deposits help keep users inside the app and reduce abandonment during market events. If those inflows get more expensive, platforms either absorb the cost, pass it on, or change user behavior.
The request to revisit settlement rules fits that pattern. When unused client funds have to be periodically settled out, firms lose some continuity in the customer wallet experience. Users may need to re-fund accounts more often, which loops them back into the MDR issue. Put differently, the industry appears to be arguing that two separate rules are compounding each other: money is pushed out more often, and bringing it back in can cost more than brokers think is reasonable.
The background
Groww, Zerodha, Upstox and Angel One are among the companies that have helped push stock investing deeper into India’s retail market. Their rise has coincided with the use of real-time bank-to-app payments as a common funding mechanism for brokerage accounts.
That has been a strategic advantage. UPI made it easier for brokers to market speed, simplicity and low friction. But it also concentrated dependency on a system whose pricing and policy treatment can change. Once the line on what counts as a zero-fee transfer is redrawn, the cost impact moves into the operating model of consumer fintechs.
The broader trend line is familiar to investors. Fintechs often reduce visible friction until the underlying rails become a cost issue again. India’s online brokers are now confronting a version of that, where the friction is the act of moving cash into an investment account.
What's next
The immediate trigger is the expected industry representation to Sebi. What matters after that is whether the regulator changes MDR treatment for brokerage funding transfers, and whether any review of periodic settlement rules moves in parallel. If not, online brokers may have to choose between absorbing more of the payment burden themselves or introducing new frictions for users.
Frequently asked questions
Why are Groww, Zerodha, and other brokers contacting Sebi about UPI MDR?
According to sources, several new-age brokers are preparing to write to Sebi over merchant discount rate charges on UPI transfers into broking accounts. They want the regulator to address the cost burden tied to funding trading accounts through UPI.
What change are brokers seeking on UPI MDR charges?
The brokers are expected to ask Sebi to cap the UPI merchant discount rate at Rs 5 instead of allowing charges to go as high as Rs 300, according to sources. That would sharply reduce transaction costs on larger transfers into brokerage accounts.
What is the proposed new zero-MDR threshold for UPI transactions?
The same representation is likely to seek raising the zero-MDR threshold for UPI transactions to Rs 20,000 from the current level mentioned by sources. If accepted, more account-funding transactions could remain exempt from MDR charges.
Which brokers are reportedly involved in the Sebi representation?
Sources say Groww, Zerodha, Upstox, and Angel One are among the brokers preparing to approach Sebi. These firms are major players in India’s retail investing market, so any policy shift could affect a large user base.
How could a lower UPI MDR cap affect retail investors?
A lower MDR cap could make it cheaper for brokers to accept UPI-based transfers into trading accounts, which may help reduce friction in account funding. For retail investors, that could support faster and more cost-efficient movement of money into investment platforms.
Has Sebi announced a decision on the UPI MDR issue yet?
No formal decision has been announced in the information cited here. At this stage, sources indicate brokers are preparing a representation, meaning the matter is still at the proposal and discussion stage.
