SEBI to look into stockbrokers' concerns over UPI MDR framework: Chairman

Mumbai: The Securities and Exchange Board of India (SEBI) will examine concerns raised by stockbrokers over the new Merchant Discount Rate (MDR) framework for UPI transactions, Chairman Tuhin Kanta Pandey said on Thursday, according to a report.

On the sidelines of the NaBFID Infrastructure Conclave 2026, the SEBI chairman said some important issues have been raised and we will look into the concerns, according to NDTV Profit.

The statement came a day after brokers and broking companies raised concerns over the additional costs that UPI MDR could impose on the stockbroking industry.

On Wednesday, Zerodha CEO Nithin Kamath backed the new UPI framework on person to merchant UPI payments, saying it was probably required as the digital payment system gained widespread adoption.

However, Kamath has also flagged the issue and noted that brokers could incur UPI charges even when customers transfer money into their accounts but do not execute trades.

Kamath has suggested that a lower transaction cap should be considered for broking-related UPI payments.

"That being said, there are some use cases, like investing and broking, where the proposed MDR structure doesn’t really make sense," he said in a post on X.

According to Kamath, brokers cannot be certain that funds sent to their accounts via UPI will eventually be used for a transaction.

Because brokers cannot force customers to trade after transferring funds, they may incur costs without generating revenue if the UPI charge cannot be passed on to customers, according to him

He shared an example in which 10,000 customers making 50 UPI transfers of Rs 2 lakh each in a month without executing a trade could potentially cost a broker around Rs 2 crore under the proposed MDR.

Apart from that, Zerodha's CEO also mentioned the impact of the quarterly settlement requirements, which require brokers to return unused client funds.

“What makes this even more challenging is quarterly settlement (QS). This is a SEBI regulation that requires brokers to send unused funds back to clients every month or quarter,” he wrote on X.

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