Brokers argue that applying MDR to such payouts could result in them incurring a payment cost even though they have not earned revenue on the funds being returned | Photo Credit: ANI

Discount brokerage firms including Groww, Zerodha, Angel One, Upstox and others have approached the Securities and Exchange Board of India (SEBI) seeking changes to the proposed framework for merchant discount rate (MDR) on UPI transactions according to sources privy to development.

The brokers have proposed that MDR for capital-market transactions be limited to around 2 basis points, with an absolute transaction fee cap of ₹2-5, sources said. They have argued that such a structure would prevent the additional payment cost from being passed on to customers while keeping the impact manageable for brokers and other participants in the ecosystem.

According to industry sources, the proposed ₹300 cap is largely irrelevant for capital-market transactions. At an MDR rate of 2 per cent, a ₹300 cap would be reached only at a transaction value of around ₹15 lakh, while UPI transaction limits are around ₹5 lakh for relevant transactions.

20,000 threshold

The brokers also sought a significant increase in the threshold below which MDR is not charged. They want the existing ₹2,000 threshold to be raised to ₹20,000, saying this would better reflect ticket sizes in capital-market transactions.

The industry has pointed to the payment profile of capital-market transactions to make its case. Around 80 per cent of transactions are understood to be lumpsum payments, of which nearly 95 per cent are UPI-driven. Within these UPI transactions, around 70% are above ₹2,000, meaning a significant proportion of capital-market payments could become subject to MDR under the existing threshold.

The firms have also flagged the treatment of customer fund movements. At present, brokers could have to bear MDR when customers add funds to their trading accounts through UPI.

The industry is additionally seeking exclusion of running-account (RA) payouts, under which unused customer funds are returned to the customer. Brokers argue that applying MDR to such payouts could result in them incurring a payment cost even though they have not earned revenue on the funds being returned.

The points on the proposed changes, including the treatment of RA payouts, are based on off-the-record industry inputs and should not be attributed to individual brokers.

Published on September 17, 2026