Business Standard ·
Economy, business and finance
UPI, net banking or bank transfer: What does funding your broker cost?
UPI may remain free for investors, but brokers could face a new cost every time customers move money into their trading accounts - even if they never make a trade
For an investor, transferring money to a stockbroker is usually a routine exercise. You open the broker's app, choose UPI or net banking, enter the amount and move on.
But from October 15, 2026, the payment economics behind that transaction are changing.
Under the new Unified Payments Interface (UPI) Merchant Discount Rate (MDR) framework, payments relating to **mutual funds, securities, stockbrokers and dealers will attract an MDR of 0.02%, capped at ₹300 per transaction**. The charge is part of the merchant-payment ecosystem and is not supposed to be passed on to the customer.
This raises an interesting question for investors: if UPI remains free for them, does funding a brokerage account actually cost anything?
The answer depends on the payment method — and on the broker.
UPI: free for the investor, but potentially a cost for the broker
At Zerodha, UPI transfers into the trading account are currently free for customers. Zerodha says UPI fund transfers are instant and that the UPI limit is ₹5 lakh per transaction.
Under the new MDR framework, however, an eligible capital-market UPI transaction will attract 0.02% MDR.
So a ₹1 lakh UPI transfer to an eligible stockbroker does not attract a ₹300 MDR.
The ₹300 ceiling is reached only at ₹15 lakh.
For an investor, however, this does not mean ₹20 will be deducted from the ₹1 lakh being transferred. The government has explicitly said customers will not pay MDR.
That distinction — zero cost for the customer versus a cost within the payment ecosystem — is at the heart of the debate.
Net banking: the investor can actually pay a fee
Net banking works differently.
At Zerodha, adding funds through its instant net-banking facility currently attracts a ₹9 payment-gateway charge plus 18% GST, taking the customer-facing cost to ₹10.62 per transfer, irrespective of the amount transferred.
The fixed nature of the charge means it has a much larger impact on smaller transfers.
Zerodha currently allows up to ₹1 crore to be added through internet banking in a single transaction, subject to the bank's limits.
Investors can also use NEFT, RTGS or IMPS, depending on the broker.
Zerodha currently says it does not charge customers for NEFT, RTGS or IMPS fund transfers, although the investor's bank may levy charges.
"The revised UPI cost structure may create a distortion in the choice of payment method for funding brokerage accounts. Although the proposed MDR is payable by the merchant and cannot formally be passed on to the customer, a charge of up to ₹300 on a ₹75,000 transfer is substantially higher than the flat ₹9 plus GST currently applicable to net-banking transfers. Brokers and other investment platforms may therefore be compelled to absorb the additional cost and thereby restrict UPI funding, or encourage customers to use net banking or other lower-cost channels. This would be an unintended reversal of the policy objective of promoting UPI as an efficient and widely accessible payment system," said Rohit Jain, Managing Partner, Singhania & Co.
Therefore, an investor who does not need instant credit can potentially avoid the payment-gateway fee by using a direct bank transfer. "For transfers of Rs 75,000 and above, the comparison is quite clear. Net banking costs the investor a flat Rs 9 plus GST, about Rs 10.62, however large the amount. UPI remains free for the investor, but from 15 October 2026 the broker will bear a merchant discount rate of 0.02%, capped at Rs 300. On an Rs 1 lakh top-up, that works out to INR 20 for the broker. The widely quoted Rs 300 figure is only the ceiling, not what brokers will actually pay on most transfers. Banks have been advised to ensure that merchants do not pass this charge on to customers, so how the cost is ultimately absorbed will be worth watching," said Raheel Patel, Partner, Gandhi Law Associates.
So what is the cheapest way to fund a broker?
For Zerodha, based on its currently published charges:
But this is not an industry-wide fee structure. Investors should check the charges and limits of their own broker.
The more interesting question is therefore not simply what the investor pays.
It is who bears the cost of a UPI transaction when the customer transfers money to a broker but does not actually trade.
That is where Zerodha co-founder and CEO Nithin Kamath has raised concerns.
Kamath said he broadly supports the introduction of MDR but believes the proposed structure does not adequately account for the way money moves through brokerage accounts.
In a post on X on September 16, he said:
“The problem with broking is that there is no guarantee that money transferred to a broker will actually result in a transaction.”
That is an important difference between a broker and a conventional merchant.
When a customer pays ₹1 lakh to a retailer, there is normally a corresponding purchase.
But when an investor transfers ₹1 lakh to a brokerage account, the money may simply remain there.
The investor may buy shares later. They may not trade at all. They may withdraw the money. Or they may move it back to their bank account.
Kamath's second point is that the broker cannot simply recover the payment cost from the customer.
“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 said.
This is the central issue from the broker's perspective.
Kamath illustrated his concern with a hypothetical example.
10,000 customers each make 50 UPI transfers of ₹2 lakh each in a month, but none of them executes a trade.
At 0.02% MDR, a ₹2 lakh transfer would generate:
Fifty such transfers by one customer would therefore mean:
Kamath said this could potentially result in about ₹2 crore of UPI-related costs for a broker in a month without generating any business.
Why the broker's problem is different from the investor's
Consider an investor transferring ₹2 lakh.
From the payment ecosystem's perspective:
If the investor then buys shares, the broker may earn revenue through its broader business model.
But what if the investor does not trade?
The broker may still have incurred the payment-related cost.
This is why Kamath's argument is less about the ₹40 itself and more about the possibility of repeated transfers that generate payment costs without corresponding brokerage or other revenue.
Kamath has also pointed to the regulatory requirement for brokers to periodically return unused client funds.
After that money is returned, customers can transfer funds back into their brokerage accounts when they want to invest again.
Kamath said more than half of these transfers happen through UPI and argued that the broker could therefore end up bearing the payment cost when money moves back into the brokerage account.
“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.”
The distinction is important: this is Kamath's argument about the economic impact of the MDR structure, rather than a claim that the government intends to charge investors for moving their own money.
Kamath wants a much lower cap for brokers
Kamath has not argued that UPI MDR should not exist at all.
“I think having an MDR is okay.”
His concern is specifically about the rate-and-cap structure for broking.
He suggested that 0.02% with a cap of ₹5 or ₹10 per transaction would be more reasonable for the broking industry than the current ₹300 cap.
This is a proposal from Kamath — it is not the current NPCI framework.
Under the framework taking effect on October 15:
Capital-market UPI transactions attract 0.02% MDR
The MDR is capped at ₹300 per transaction
The customer is not supposed to pay the MDR
But the maximum charge would be only ₹5–₹10