Thin margins, high costs: why discount brokers are upset over UPI fees
· Business · LiveMint, Economic Times
Discount brokers in India are protesting a 0.02% UPI merchant discount rate (MDR) on transactions above ₹2,000, set to begin on 15 October, which they claim will devour their wafer-thin margins—often just ₹10–20 per order—after clearing corporations mandate upstreaming client funds. The BSE Brokers’ Forum (BBF) has flagged this to Sebi, arguing brokers act as pass-through entities, with client funds flowing directly to clearing corporations for settlement, leaving brokers with no operational use of the money. Industry experts warn the fee could make UPI prohibitively expensive for retail traders, stifling growth in a sector already operating on razor-thin profitability. Most discount brokers charge nothing for delivery trades but earn flat fees for futures, options, and other segments. The timing is critical as retail participation in stock markets rises, with brokers fearing the MDR could deter new investors.
Why it matters
The MDR hike directly threatens the viability of discount brokers, which have democratised stock trading for millions of Indian retail investors by offering low-cost services. If UPI transactions become unviable, traders may shift to costlier payment methods, raising transaction fees for all investors and potentially slowing India’s retail trading boom. Brokers, already squeezed by competition, could scale back services or exit the market, leaving investors with fewer affordable options.
Read the original report — LiveMint
Join us on Telegram
Breaking news the moment it lands. At 10,000 members we ship the Android app.