The Securities and Exchange Board of India (SEBI) has agreed to look into the problems caused by new UPI merchant charges. Stock brokers are worried that these new fees will hurt their business. SEBI Chairman Tuhin Kanta Pandey said the regulator will examine these concerns to see how they can make things easier for the industry. This news comes after many brokers complained that the new rules make it expensive to handle client money.

From October 15, a new Merchant Discount Rate (MDR - a fee charged to merchants for processing digital payments) of 0.02% will apply to capital market transactions. This includes money sent to stockbrokers, mutual funds, and investment advisors. While the fee is capped at ₹300 per transaction, brokers say it is still a heavy burden. This rate is lower than the 0.4% charged in other business sectors, but it creates a unique problem for the broking world.

Brokers are unhappy because clients often move money into their trading accounts without actually making a trade. In the banking and broking world, this money is just a deposit for future use. However, under the new rules, the broker might have to pay the MDR fee every time a client moves money in. Since SEBI rules require brokers to send unused money back to clients regularly, the same money could be charged multiple times if the client moves it back and forth.

This is a big problem for discount brokers who offer low-cost or free trading services. In many cases, the brokerage fee earned by the firm is less than the UPI MDR they have to pay. Since brokers are not allowed to pass this cost to the customers, they must pay it from their own pockets. This will directly reduce their profit margins and could make it hard for them to keep offering cheap services to retail investors.

Industry leaders like Nithin Kamath of Zerodha have spoken out about this issue. He suggested that if a fee must exist, it should be capped much lower, perhaps between ₹5 and ₹10 per transaction. The BSE Brokers’ Forum has also taken this matter to SEBI, arguing that a flat merchant fee does not fit the way investment accounts work. They believe that fund transfers for investing should not be treated the same as buying goods at a shop.

For bank officers and those in the payments sector, this is an important development to watch. It shows the tension between expanding UPI revenue and keeping investment costs low for the public. If SEBI decides to change the rules, it could lead to a special lower rate for financial intermediaries. For now, the industry is waiting to see if the regulator will provide relief before the October deadline or adjust the caps to protect the low-cost broking model in India.