SEBI to hear broker and AMC concerns on MDR

Securities and Exchange Board of India (SEBI) will hear broker and asset management companies’ concerns regarding the merchant discount rate on UPI transactions, according to the Chairperson Tuhin Kanta Pandey on September 12 at Mumbai.

“I think there are some important issues there. We will certainly look into it and see how we can ease them,” said Mr. Pandey while speaking on the sidelines of the Infrastructure Conclave conducted by NaBFID. 

NPCI announced to charge merchants a fee of 0.4% of the transaction for person-to-merchant transfers of value exceeding ₹2000 as an MDR. This fee has been kept at 0.02% for capital market transactions, while excluding auto-pay mandates. Brokers say that this can increase costs for their even if clients do not execute any trade.

Further, the requirement of brokers to transfer unused client funds to their accounts on a quarterly basis accentuates the costs.

“This (quarterly settlement) is a SEBI regulation that requires brokers to send unused funds back to clients every month or quarter.”

Most customers then transfer these funds back to their broking accounts, with more than half of these transfers happening through UPI. 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,” said Nithin Kamath, Founder and CEO of broking application Zerodha.