Zerodha CEO Nithin Kamath reacted to the government’s newly announced Merchant Discount Rate (MDR) on select UPI transactions above Rs 2,000, saying that while it was inevitable at some point, it does not make sense for certain use cases, such as investing and broking. 4% on transactions above Rs 2,000.

Speaking to X, Kamath said the introduction of MDR was inevitable especially given how widespread UPI adoption has become. It could also lead to more competition, instead of just three apps accounting for more than 95% of the market, he wrote.

“That being said, there are some use cases, like investing and broking, where the proposed MDR structure doesn’t really make sense,” he added.. Why brokerages are bullishThe Zerodha CEO said the problem with broking is that there is no guarantee that money transferred to a broker will actually result in a transaction.

“As brokers, we can’t force a customer to trade after transferring money. And if we can’t pass the UPI charge on to the customer, there is essentially no limit to the cost a customer can impose on a broker without generating any revenue,” he wrote.

Kamath explained this with an example. Around 10,000 customers could each make 50 UPI transfers of Rs 2 lakh in a month without executing a single trade.

“What makes this even more challenging is quarterly settlement (QS). So regulation essentially forces this movement of money every month or quarter, and the broker could end up bearing the cost when the money comes back, without any incremental benefit or revenue, he said..

Earnings boost ahead? Can Zerodha continue zero brokerage charges after new UPI fees?

Nithin Kamath highlighted that Zerodha currently doesn't charge brokerage on equity delivery trades because the economics allow them to offer them for free. “But if every UPI transfer starts carrying an additional cost, irrespective of whether the customer actually trades, I don’t see how we can absorb this indefinitely,” he wrote.

02% with a cap of Rs 5 or Rs 10 per transaction seems much more reasonable for broking, instead of a cap as high as Rs 300. I think MDR on UPI was probably inevitable at some point, especially given how widespread UPI adoption has become.

It could also lead to more competition, instead of just three apps accounting for more than 95% of the market. That being said, there are some use cases, like…— Nithin Kamath (@Nithin0dha) September 16, 2026 New charges on UPI transactionsIt is important to note that consumers will not be charged for making UPI payments, while Person-to-Person (P2P) transfers will also remain free.